How Data Centers Are Driving The Realty Demand In India
India is undergoing a digital explosion which is giving way to the rise of the realty sector. Since the pandemic, digitization in the country got an unprecedented push. With people choosing to work from anywhere, make digital payments, shop for goods online, and reconnect with friends and family online, and the greater focus of the government on e-governance, the demand for data centers in the country is rising. Added to that, the facilities and spaces that support the infrastructure necessary for storing and managing a large amount of data are also in demand.
This trend comes as a new ray of hope for commercial real estate firms that are equipped with or plan to invest in large parcels of land equipped with good internet connectivity, disaster proofing, and 24/7 power supply. The covid-induced-pandemic gave a leapfrog jump to people’s data consumption. The government also supported the rise of data consumption by deciding to offer infrastructure status to data centers. This will allow developers to get easy access to institutional credit at lower rates and also attract and win foreign investments.
The biggest data services conglomerates agree on the fact that to address the ever-increasing data-storage needs of the country, we need to increase our data center capacity as well. Recently, ICRA, the rating agency, released a prediction that the country’s data center capacity will increase by six times in the next six years. 4,900-5,000 MW of capacity and close to Rs 1.50 lakh crore of investment are also being added to these centers.
Several renowned Indian conglomerates including Reliance and foreign investors like Amazon, Microsoft, Blackstone, and Princeton Digital Group are increasingly joining the bandwagon and investing in Indian data centers, while the existing players are already expanding their capacities.
How data centers are different from regular office buildings:
Data centers are meant for supporting the storage of giant and massive computer hardware. The data centers building are also different from typical office buildings, both structurally and size-wise they are much larger than regular corporate buildings. These buildings are equipped with capital-intensive facilities to support 24/7 power supply, uninterrupted cooling, and power backup generators for emergencies. They also require proximity to the tenants.
Data center facilities are designed and built to host computer equipment. In comparison to regular commercial buildings, these buildings are more advanced as they follow multiple engineering, operational, design, and engineering practices. Some of the key parameters to keep in mind while setting up a data center are –
- Proximity to submarine cable landing stations
- Disaster proofing and recovery
- Physical security
- Availability of skilled man force
- 24/7 availability of support and maintenance services
- Reliable energy sources
In the traditional office building, the land and the building take the maximum expenditure. In the data centers, on the other hand, these factors comprise only 25-30% of the total expenditure. The remaining 70-75% goes into mechanical, plumbing, and electrical factors. While in regular corporate buildings, the cost per square footage is generally Rs 4,000 to Rs 5,000, the same rise up to Rs 20,000 to 25,000 in a data center building. This also includes the MEP (Mechanical, Electrical, Plumbing) aspects.
There are some hurdles also recognized on India’s road to becoming the next data center hub. According to Industry players, one of the major roadblocks in the growth of the country’s data center industry is indecisive central policy. With the Draft Data Center Policy 2020 and the Digital Personal Data Protection Bill 2022 yet to receive parliamentary approval to become statutory vehicles, the country still finds itself halfway on its ladder to become a rising data center hub.
Opportunities for India
India is very likely to emerge as an alternative data center hub soon. Its vast geographical resources, focus on renewable energy, cost-competitiveness, and increasing connectivity for submarine cables, makes it an ideal location for setting up a data center. The rising temperatures due to global warming and drought-like situations emerging in European regions are proving to be major operational hurdles in locations that already shelter the majority of data centers.
To further add to the complications, ongoing geo-political crises are creating supply-chain disruptions. The disruption in the supply of power generation sources like crude oil and gas has led the major data center conglomerates to consider setting up capacities elsewhere. Amidst this India with all its geographical benefits is appearing as a favorable alternative.
Also, the 10x speed boost from the 5G network and the considerable increase in the demand for data from smart devices are both expected to drive the demand for data centers. By the end of 2027, 500 million Indians are expected to have 5G subscriptions, with an average monthly data usage of 50 GB. This would increase the demand for data centers in the country. The exponential growth of digitalization will also accelerate data usage.