NVIDIA HGX H100 server from Yotta Data Services Pvt. Thursday, March 14th, 2024, data center in Navi Mumbai, India.
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Big story
India's early nascent but rapidly growing data center industry is underway with a gold rush loaded by global giants, billionaires and even luxury property developers.
According to a May report by real estate services and investment management firm Collier, India's current data center capacity is approximately 1.2 gigawatts, but the market has more than doubled, more than doubled over 3 gigawatts in the next five years.
That growth has attracted global data centre companies, Indian billionaires, and even luxury real estate developers.
In July, Google reportedly had discussions with the government of Andhra Pradesh to establish a 1 Gigawatt facility. A month later, Sam Altman of Openai announced that his company is exploring plans for India's 1 Gigawatt data hub.
These moves highlight the scale of ambition. Facilities once measured at tens of megawatts are planned in gigawatts by companies that often consume “hyperscalar,” or by companies that consume a huge amount of computing power. One gigawatt is 1,000 megawatts of power, while the megawatts are 1 million watts.
Of course, competition is fierce. Over 15 players are chasing market share from global heavyweights such as Japan's NTT, Singapore's Temasek-backed STT GDC and US operator Equinix.
Real estate developers are also pivoting. Luxury Realty developers Hiranandani Group's Yotta Infrastructure, Delhi-based Anant Raj Developers and Pune Based Panchshil Realty have also swung from homes to hyperschools, shaking billions from homes and office builders to digital landowners.
What drives the boom?
At the heart of the surge is the structural changes in demand. About 60% of Data Center clients are companies, 30% are hyperscalers, and around 10% are AI users.
“We expect that as AI workloads rise, we expect businesses to be consistent in their use, but hyperscaler usage could increase to around 35%. Certain demand for AI users could rise between 20% and 25%.”
Examples of HyperScalers include large data center operators such as Microsoft, Amazon Web Services, and Google.
Alok Bajpai, managing director of NTT Data Systems, told CNBC that it is driving demand for enterprise data through digitisation of banks in India and data localization regulations requiring Indian financial data to be stored domestically. The rise of e-commerce services and subsequent cloud infrastructure companies have led to a second wave of data center demand, he added.
Currently, the third wave is expected to come from AI workloads.
Last week, Equinix expanded to India's second state through its first AI-centric facility in Chennai.
60% of Equinix's revenue comes from customers working with three regions, the US, Europe, Asia and “they are eager to expand to India.”
Currently, enterprise clients drive the majority of the demand for data centres in India, but the needs are relatively modest. As customer profiles change, facilities are designed to handle much larger workloads.
“Previously, demand for enterprise-driven capacity rarely exceeded 10 megawatts. With hyperscalers, requirements increased to 25 megawatts, and in some cases 50 megawatts. With AI workloads, there could be an additional 75-100 megawatts.”
Why India?
Paper has some natural benefits to India. Markets in Asia-Pacific region such as Japan, Australia, China, and Singapore are mature. Singapore, one of the oldest data center hubs in the region, has limited room for large data centers due to land availability issues.
India has plenty of space for large-scale data center development. Compared to European data center hubs, the electricity costs in India are relatively low. Coupled with India's growing renewable energy capacity – important for electricity-hungry data centres – economics begins to be compelling.
Regional demand, supported by the rise in e-commerce, a key driver of data center growth in recent years, and potential new rules for storing social media data, will strengthen the case.
Simply put, India is in the sweet spot where global cloud providers, AI players and domestic digitalization all converge to create one of the hottest data center markets in the world.
Who is taking part in the race?
For now, global majors still dominate. According to experts, NTT Data Centre and STT GDC are leading India's higher capacity share. Domestic operators such as CTRLS, Airtel-owned NXTRA, and Princeton Digital Group, owned by Warburg Pincus, are also part of the mix.
But what veils the landscape of Indian data centres is the ambitions of Indian billionaires. Gautam Adani's US-based joint venture with EdgeConnex and Adaniconnex, currently operating under 40 megawatts, is quickly expanding to 210 megawatts.
Mukesh Ambani's trust is planning a 3 Gigawatt mega data centre in Gujarat, western India, with investments of between $2 billion and $30 billion. This is a project that can reconstruct the landscape of the industry.
Operators who have switched to small developers are also on the move. Residential township developer Anant Raj Developers has announced plans to invest $2 billion by 2032, covering 300 megawatts of capacity.
Obstacles
But India is not an easy place to build.
Unlike other markets with clear regulatory frameworks, Indian data centre developers face a maze of over 30 approvals from various institutions, according to industry experts. “In India, data center operators often encounter delays due to lack of standardized regulations across the state,” real estate consultant Knight Frank said in an April report.
Consider the case of the US-based Colt, who bought land in Mumbai in 2018 and built a 100-megawatt facility. It took six years for the site to be released, with 22 megawatts of operational capabilities. To accelerate growth, Colt is entering a $1.7 billion joint venture with local developers RMZ Infrastructure in 2024, aiming to build 250 megawatts of capacity in Navi Mumbai and Chennai.
The hurdles also spread across the land.
Data centers require parcels without large litigation in certain regions. Many data center operators are supported by private equity or high-tech US companies, and are unable to win land without a clear title. This could lead to corporate governance issues, said the real estate consultant who wishes to remain anonymous.
These delays in regulation created opportunities for Indian property groups that purchase land, resolve disputes and sell to international operators. In some cases, they go even further, building and leasing data centers or fully implementing them.
However, flooding of participants puts surplus and price wars at stake, especially in early markets. “When comparing India with the Indonesian market, pricing has been significantly reduced due to price competition where there are few players getting Hyperscalar accounts,” said Devi Shankar, senior executive director, CBRE India.
She added that there could be some degree of integration in the market over the next two or three years.
For now, the lace is wide open. However, integration seems inevitable as dozens of operators are chasing the same award.
CNBC's Top TV Picks
Equinix India Managing Director Manoj Paul discussed the opening of the company's new A-Ready data centre in Chennai, in Tamil Nadu, southern India.
Daniel Lam of Standard Chartered Wealth Solutions said that despite the threat of US tariffs, the Indian market is “unsubmitted.”
Vinfast Asia CEO Pham Sanh Chau said that India could increase its planned annual production capacity from 50,000 to 150,000 units given the stronger initial demand than expected.
You need to know
India's central banks are trying not to change interest rates. Sanjay Malhotra, Governor of the Reserve Bank of India, said inflation was significantly eased in the first quarter, but growth could slow down later in the fiscal year due to uncertainty in global trade.
US pharmaceutical fees reserve the standard Indian drug maker, but investors are volatile. The latest US drug tariffs did not affect Indian pharmaceutical companies that export generic drugs primarily to the US, but stocks in most Indian pharmaceutical companies fell.
Qualcomm will consult with TATA to tap on Indian chip capacity. Qualcomm's global chief operating officer and chief financial officer Akash Palkhiwala said the company aims to tap India's chip capacity as soon as it meets its node requirements.
This week's quote
We are considering expanding our factory in India. The process of applying for environmental clearance for the second phase is currently underway. The second phase is to produce up to 150,000 vehicles per year. That's thanks to positive responses from the market.
– Pham Sanh Chau, CEO of Vinfast Asia
In the market
The Indian stock exchange was closed on October 2nd for Mahatma Gandhi Jayanti and Dassera, and trading resumed on Friday.
It's approaching
October 3rd: Indian FX preliminary data
October 6th: Tata Capital will release 155 billion rupees IPO
October 7th: LG Electronics India launches Rs 116 billion IPO
October 7th-9th: Mumbai's Global Fintech Fest 2025
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