India’s data center industry will attract investments worth $5.7 billion by 2026 amid growing demand for artificial intelligence (AI), according to a report by real estate and investment management firm JLL.
The report highlights that the Indian data center industry will expand capacity by 791 MW by 2026 and this expansion will lead to an actual space requirement of 10 million square feet.
“India’s data center (DC) industry will see extraordinary growth, with forecasts of 791 MW of capacity addition by 2026. This expansion will drive demand for 10 million square feet of real estate, attracting investments worth $5.7 billion,” – the report said.
A data center is a facility that centralizes an organization’s IT operations and equipment for storing, processing, and transmitting data and applications.
The report highlights that the growth in computing power and the resulting novel applications are expected to drive sturdy demand for the DC industry in the medium term. The expected demand of the Indian data center industry will be 650-800 MW during 2024-26.
The escalate in demand for data centers is primarily due to the growing utilize of artificial intelligence (AI).
The report noted that cloud service providers (CSPs), which generally offer IT infrastructure systems primarily for data storage and computing power accessed over the Internet, have adjusted their requirements to accommodate AI-driven demand. CSPs have also announced higher investments to boost AI-powered growth.
“The exponential growth of computing power and data volumes driven by artificial intelligence requires the development of novel data centers capable of meeting energy, processing and cooling needs. The anticipated growth and advancement of various fields of artificial intelligence is expected to create additional demand for data centers, increasing their performance requirements and enhancing their capabilities,” said Rachit Mohan, Director, Data Center Consulting, India, JLL.
According to the report, there was a 12 percent escalate in absorption in the second half of 2023 to 81 MW compared to 72 MW in the same period last year. This growth can be attributed to an escalate in cloud service provider (CSP) momentum after a brief hiatus in the first half of 2023. In Mumbai, absorption almost doubled during the period as CSPs resumed their absorption pace.
“India is poised to become the third largest economy, with a projected GDP of USD 5 trillion by 2027, with the share of the digital economy at around 20%. This digital expansion is expected to fuel the growth of the Indian data center industry, which is expected to grow from 853 MW in 2023 to 1,645 MW in 2026.” said Dr. Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.
There was lower supply growth of 75 MW in the second half of 2023 as available supply from the first half was used to meet demand, resulting in a lower vacancy rate of 5.5%.
With a vast user market, a talented workforce and a prospering startup ecosystem, India presents a significant opportunity to emerge as a global data hub driven by sustainable practices.
The country’s DC sector has grown from 350 MW in 2019 to 854 MW in 2023, in line with growing trends in the utilize of digital technologies.
