The digital push originated by COVID-19 has been profitable for data centers that still have a potential to earn around 10-14 percent rental yield yearly. The prime cities where there is a maximum demand for data centers include Chennai, Mumbai, Bengaluru, and Hyderabad, among others. Government’s efforts to make data localization essential ensures a promising future for data centers in India.
Presently the area data centers occupy is around 7.5 mn sq. feet in top 8 cities. This will increase up to 10 mn. Sq. ft by the next 2-3 years. Several big businesses such as Hiranandani Group, Adani, Salarpuria Sattva etc. Have immense investment plans for building data centers in India.
“Currently, data centres in the top 8 cities occupy 7.5 mn sq. ft. space and an additional 10 mn sq. ft. space is likely to be added over the next 2-3 years. Immediately after India went into a lockdown mode due to COVID-19, there was a 25-35% increase in data centre capacity usage as companies began to overhaul their digital infrastructure to deal with the new work environment,” said Shobhit Agarwal, MD & CEO – ANAROCK Capital says, “
There was a 25-35% increase in data centre capacity usage as companies began to overhaul their digital infrastructure to deal with the new work environment.
“The pandemic has been a massive catalyst for digital adoption across the spectrum,” says Shobhit Agarwal. “Work-from-home (WFH) compulsions, online education, video-based medical consultations, a huge increase in ecommerce and business-related video conferencing and webinars are increasing the demand for data centres. Furthermore, the government’s move to make data localization mandatory ensures a promising future for data centres in the country.”
Industry estimates show that the data centre outsourcing market in India is worth more than 2 billion US Dollars. It is also forecasted to grow 25 per cent CAGR to reach 5 billion US Dollars by the financial year 2023-24.
The fact is data centers are today emerging as one of the top few alternative investment sectors in Asia. Data center is another real estate asset class with enormous potential, and foremost real estate developers are directing all their attention towards this opportunity to earn loftier returns from early investments.
Chief players like Hiranandani Group, Adani Group and Salarpuria Sattva have already rolled out significant investment plans for building data centres in India over the next decade and more.
Government has taken the initiative to transform the nation into a digitally-empowered knowledge economy through its flagship programme Digital India. The main growth drivers for this are the active internet users, large mobile telephone subscriber base, sustainable, efficient and future-ready cities’ mission, burgeoning young, tech-savvy population, globalization, enabling policy environment, start-up ecosystem and Industry 4.0 – a tectonic shift.
It has proven during the time of this pandemic that the future growth of several industries relies heavily on digitization. And this would only be possible with the building of more and more data centres in India.
Earlier, there were only a handful of data centre operators, including CtrlS, STT GDC and NTT-Netmagic. But these were just seen as a mesh of wires providing connectivity to various internet users rather than potential real estate assets. The requirement of data centres was limited. Even people were unaware of cloud computing.
But the perception has changed now. Developers and investors alike have understood the new needs that have emerged now and are seeing this time as an opportunity to diversify from the conventional business of residential, commercial and retail assets.