India’s data centre industry sees a total investment of $4.8 billion

V Nagarajan

The Indian data centre industry is expected to add 681 MW capacity by end of 2024, according to a survey by property consultant JLL. This will lead to a doubling of capacity to 1,318 MW which will need 9.1 million sq. ft of real estate space requiring a total investment of $4.8 billion in both the data centre infrastructure and real estate of the data centre sector, according to a survey by property consultant JLL.

Last year, it closed with robust demand with estimated absorption in the range of 171 MW, which is a robust 31 per cent growth.

This impressive growth can be attributed to the delivery of pre-committed supply to hyperscale cloud service providers (CSP).

Colocation (Colo) operators are scaling up construction to meet the delivery targets. Some operators adopted retrofitting existing buildings to reduce the delivery time.

Supply has been mostly concentrated in Mumbai due to submarine cable connectivity, power availability and a large user market.

Like other industries, data centre has been equally impacted due to global disruptions, both man-made and natural.

Climate change has been at the doorstep with a sharp rise in temperatures leading to unprecedented drought-like conditions in Europe.

The impact of these outages especially due to sustainability issues is likely to result in a shift of data centre operations to other locations. India with its vast geographical resources, thrust on renewable energy, increasing submarine cable connectivity and cost competitiveness is likely to emerge as an alternative data centre hub.

“Mumbai is expected to account for 57 per cent of the new supply followed by Chennai at 25 per cent. Increasing digitisation is expected to save costs and make organisations resilient in times of uncertainty which will be one of the key drivers of data centres’ growth in India.

The impact of 5G rollout, personal data protection legislation and investment incentives is expected to drive multi-year growth of Indian data centres,” said Rachit Mohan, Head, Data Centre Advisory, India, JLL.

“Hyperscales public cloud services have been scaling up their requirements significantly and are expected to grow further. This demand is fuelled by the rising digital adoption across sector, and the outsourcing of IT infrastructure to third-party players,” said Mohan.

The commercial rollout of the 5G has the potential to increase the median download speed by 10 times as compared to the existing 4G network. 5G is projected to account for almost 40 per cent of India’s mobile subscriptions – 500 million – by the end of 2027 with average data usage of 50 GB per month.

Supply chain disruptions and skilled manpower shortages likely to push up construction costs.

The global geopolitical crisis has adversely impacted the availability and prices of key energy inputs required for production and logistics leading to inflation across the value chain.

The supply chain disruption has also led to a shortage of hardware equipment required for the functioning of data centres.

Digital payments volume jumped by 64 per cent to 72 billion transactions in FY 2021-22 from 44 billion transactions in FY 2020-21.

Over-the-top (OTT) video streaming market saw a sharp rise in its paid subscriber base to an estimated 70-80 million in 2021 from 14 million in 2018-5x growth in three years. 5G-driven growth in online gaming, augmented reality, and digital commerce is expected to drive data usage.

I have invested in overseas property during my stay in the Gulf. Can I continue to hold after my return to India for permanent settlement? Edwin, Sharjah.

According to section 6(4) of the FEMA, you can hold, own, transfer or invest in any immovable property situated outside India if such property was acquired, held or owned by you when you were an NRI or inherited from a person resident outside India.

I own a flat and commercial space in Mumbai. I am planning to dispose of both and reinvest in a larger apartment in Pune. Can I get exemption from capital gains for commercial space as well? Manoj Gupta, Dubai.

Yes. You can claim exemption under section 54F on sale of commercial space by investing the sale proceeds in a larger apartment.

The new apartment has to be purchased within one year before or two years after the date of transfer of capital asset or constructed within a period of three years after the date of transfer. It will be available only if you do not own more than one residential house property on the date of transfer.