_Rise of Data Center in India
Q. What factors are driving the data center business in India? How does it affect realty prospects in Indian metros?
Data centres are the newest real estate asset class in the country and are attracting the attention of real estate investors due to the long-term nature of the underlying leases and the continuously growing need for data. They do not have a direct impact on the primary asset classes such as residential and commercial real estate since they are located away from residential locations due to regulatory imperatives. However, their proximity to technology and BFSI sector-dominated markets such as Bengaluru, Hyderabad, Pune, and Chennai could spur the demand for further office space in these markets as this proximity might be a factor for some companies.
Regulatory factors
- Infrastructure status was granted to the Data Centre industry in the FY23 budget
- Draft Personal Data Protection Bill, 2021
- Data Center Policy, 2020 - The aim is to create a favorable climate for investments and incentivize the growth of a robust and sustainable Data Center sector via the following reforms:
- Creation of 100 Smart Cities
- INR 80 bn allocation to Data Centers and IT parks in 2020 budget, aiming to be USD1 tn digital economy by 2025
- Increasingly stringent data backup and disaster recovery norms across industries
Increasing wireless connections and internet usage
- Out of a total 1.15 bn wireless subscriber base growing at 7% annually since 2010, India currently has 726 mn wireless internet subscribers, the second-highest in the world
- Pure broadband subscriptions have grown at 55% annually since 2010 to the 0.7 bn subscribers currently
- Currently having the highest usage per smartphone per year, India’s traffic growth continues to increase according to the Ericsson Mobility Report 2020. Total data traffic is expected to triple from the current 7 exabytes per month to 21 exabytes per month in 2025. Average traffic per smartphone is expected to nearly double to 25 GB per month by 2025. 410 mn additional smartphone users are expected in India by 2025.
Spurt in the usage of social media and digital payments
- Over 250 mn social media users in India according to the 2019 Social Media report by the Indian Ministry of Youth Affairs and Sports. India is currently Facebook’s largest user base in the world
- 10x growth in per capita digital transactions from 2014-2019 according to RBI. Further 10x expected from 22 transactions per capita per month in 2019 to 220 by 2022
- Digital payment users are also expected to triple by 2022 from 300 mn in 2019
- The youth have been the largest and quickest adopters of social media and new cloud-enabled tech across the world. 34.33% of the Indian population is currently estimated to constitute this massive demographic aged under 25 according to the Social Statistics Division of the Central Statistical Office
Increased cloud usage
- Hyperscale capacity touted to increase exponentially in the new decade
- 80% of incremental co-location capacity is expected to be claimed by hyper-scalers
Q. With land, scarcity continuing to plague Indian cities, will there be more competition from data centers, along with residential, retail, and office spaces? How will this affect all sky-high land prices?
Data centers are required by law to be located away from residential establishments where the land is in high demand and where most land price increases have occurred. Hence, data centers will not have a large impact on average land prices.
Q. What kind of digital infra is needed to support the data center ecosystem? With 5G coming to Indian cities by year-end, how will this impact data centers?
Data centers themselves are the digital infrastructure required for India to achieve its goal of becoming a $1 tn economies by 2025. 5G rollout will enable much higher bandwidth with increased connection density and lower latency. Edge networks and widespread use of IOT can become practicable in a 5G world and will generate huge amounts of data that will need enhanced data center capacities to process, furthering the development of the Indian data center industry.
The entry of 5G, availability of greater bandwidth provided by high-capacity fiber optics, and availability of adequate energy to power the data center are crucial for the development of this growing industry. Other digital aids such as AI based cooling systems and energy and space-efficient hardware will help the industry to evolve and scale up quickly.