Over 10 million square feet of brand-new data centres could take form and shape across eight Indian cities, in the next two or three years, a study by Anarock revealed. At present, only about 7.5 million square feet across these markets are occupied by data centres.
However, a significant and sustained spike in capacity usage at existing data centres in the COVID-19 has made these projects a solid alternative asset class for real estate companies.
“Immediately after India went into a lockdown due to COVID-19, there was a 25 to 35 percent 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 and CEO, Anarock Capital.
“Work-from-home (WFH) compulsions, online education, video-based medical consultations, a huge increase in e-commerce and business-related video conferencing and webinars are increasing the demand for data centres," he added.
Adani, Hiranandani make big bets
It’s little wonder then that the likes of Adani, Hiranandani and Salarpuria Sattva have announced significant investments towards building data centres across the country. While the Adani Group has pledged over Rs 70,000 crore towards construction of solar-powered data parks in Andhra Pradesh, the Hiranandani Group has said it would invest Rs 15,000 crore towards building data centres in Mumbai, Panvel and Chennai.
While Salarpuria Sattva is building data centres in Bengaluru, Hyderabad and Chennai, Japanese tech major NTT is investing Rs 11,000 crore towards doubling its existing data centre capacity over the next three years.
Present-day data localization laws have more than ensured that these companies and their projects stand to benefit from several companies looking to store Indian data within Indian territorial borders. Just last month, Hiranandani Group chairman, Niranjan Hiranandani, told CNBC-TV18 that business at the company’s data centres could grow by 30 percent, in the next three years.
‘Data centres’ rental yields are 10-14 percent’
Anarock data has said that data centres could return rental yields of 10 to 14 percent, buoyed by the increased digital push thanks to COVID-19. The report names Mumbai, Bengaluru, Chennai and Hyderabad are the top contenders for future data centres.
“As per industry estimates, the data centre outsourcing market in India is worth more than $2 billion and is projected to grow at 25% CAGR to reach $ 5 billion by FY 2023-24,” said Anarock’s report, emphasizing that data centres are emerging as a good alternative asset class for Indian real estate, with “huge potential”.