India Colocation Data Centre industry to double to 1008 MW by 2023: JLL

• The colocation data centre (DC) industry stood at 499 megawatts (MW) at the end of H12021
• Draft data protection bill and various Central and State Government policies to propel Indian data centre industry growth
• Personal Data Protection Bill to set the foundation for Indian colocation data centres

Note: GW* and MW*- indicates IT design power load, Colocation refers to third party data centres

India’s colocation data centre (DC) industry is expected to double by 2023, according to JLL. The global real estate firm expects capacity to increase from 499 megawatts (MW) IT load in H1 2021 to 1008 MW by 2023. This, in turn, would lead to a requirement of over five million sq. ft of real estate, as per JLL research.

Mumbai and Chennai are expected to be leading DC hubs due to assured power supply, undersea cable landings and large user markets. One of the biggest enablers for the growth will also be the approval of the draft Personal Data Protection Bill (PDP) by the joint Parliamentary Committee, which JLL believes will represent a major milestone for India’s colocation DC industry, which largely provides IT infrastructure for storage and computing requirements.

“The importance of information in form of data has gained prominence over the years with the entire digital revolution being driven by the usage of data. The colocation industry is expected to benefit from the legislation due to the prerequisite for data storage in the country. The potential of the industry is evident from the fact that three central legislations and four states have enacted data centre sector policies while four more states are in the process of notifying their policies,” said Rachit Mohan, Head, Data Center Advisory – India, Co-Head, Office Leasing Advisory – Mumbai, JLL

The Central Government has outlined the importance of the sector by formulating a Data Centre Park Policy and the creation of four Data Centre Economic Zones that aims to make India the global DC hub.  The draft policy aims to accord “infrastructure” status to the sector bringing in the benefits of availing long-term credit from domestic and international lenders.

“The increasing digital economy has also necessitated regulations to protect the right of Indian users by storing the details of the digital transaction locally. The Reserve Bank of India has issued a directive imposing data localisation requirements on service providers/intermediaries / third-party vendors and other entities in the payment ecosystem. The financial regulator has issued various directives for financial intermediaries to comply with the localisation provisions. The local storage of digital transactions has already led to an increase in demand for data centres from the BFSI sector,” said Dr Samantak Das, Chief Economist and Head of Research & REIS (India), JLL.

Various states have realised the potential of the industry and have created special provisions for the industry. Maharashtra, Uttar Pradesh, Telangana, and Orissa have dedicated DC policy while West Bengal, Tamilnadu, Karnataka and Haryana have notified DC Regulations.

Maharashtra was one of the first states to include Data Centers in their Industrial Policy. The State announced integrated Data Centre Policy in 2019. As per the policy, five integrated DC parks would be eligible for financial incentives and duty waivers with minimum investment of INR.1500 crores by the developer company.

Telangana took an early lead when it announced significant initiatives in the Information and Communication Technology policy nearly five years back in 2016. Despite the lack of cable landing stations, the state has provided other incentives like land availability and power at lower cost along with other tax waivers for DC operators.

Uttar Pradesh which has been successful in establishing Noida as the growing commercial and industrial hub introduced the DC policy in 2021 intending to set up 250 MW Data Centre industry. The policy has provided subsidies on land procurement, capital and interest rates and non-financial incentives. The state of Odisha has also provided incentives in form of land fees and electricity subsidy and other financial incentives.

The importance of the DCs as the backbone for digital growth has led to other states drafting policies to attract DC players. West Bengal, Tamilnadu, Karnataka and Haryana have announced their draft policies and are expected to be notified into regulations. India being the second largest mobile user population globally, lower data usage cost and fast-growing digital market augur well for the development of the industry.