Drop Whatever You’re Doing Right Now And Invest In Indian Data Centers

Investable Universe
4 min readOct 23, 2020


New research from commercial real estate investment and services firm Colliers is forecasting the stock of colocation data centers in India to more than double by 2023, from a current level of 9 million square feet to approximately 20 million square feet nationwide.

Colliers points to solid secular fundamentals, such as increasing digitization, cloud adoption, and the introduction of IoT devices in India. Add to this the Modi government’s push for new regulations to localize data storage, and the Reserve Bank of India’s target of a tenfoldincrease in digital financial transactions.

A mission

Earlier this year, the Indian government’s 2020 budget announced a five-year allocation of RS 8000 crore (about $1.1 billion) for a National Mission on Quantum Technologies and Applications (NM-QTA) that will focus on aerospace, numerical weather prediction, simulations, secure finance and communications, advanced manufacturing, health, agriculture, education and cybersecurity. Data center and IT parks would be included this National Mission.

From January to August of this year, data centers drew investments of INR 29 billion (around $394 million), or 46 percent of all private-equity investments in Indian real estate. But there’s plenty of room to run, it seems. Per Colliers research, India currently has just 1.2 MW per user of colocation data center capacity, compared to per-user stock of 19.1 MW in Europe, suggesting very robust potential for further capacity buildout.

Incentives, incentives, incentives

Recent research from JLL has valued the investment opportunity in India’s data center market at nearly $5 billion over the next five years, projecting a tripling in industry capacity by 2025. JLL’s research notes that the number of wireless data subscribers in India increased 2.5X, 280 million to 700 million between 2015 and 2020, with 20 percent year-over-year growth.

Besides the growth swell in individual users, data-usage-per-subscriber has risen further since the onset of covid-19, due to work-from-home, online education, and casual internet use during India’s lockdown.

Most of India’s existing data center square footage is concentrated in Mumbai, the de facto financial capital, which benefits from generous Maharashtra (state) government incentives. The industrial capital of Chennai is another beneficiary, with Colliers adding that incentives from the Tamil Nadu state government are likely to drive INR 8.3 billion ($1.1 billion) in private sector investment near that manufacturing hub (in July, it was reported that Yotta Infrastructure, India’s largest hyper scale Tier 4 data center provider, signed an MOU with the Tamil Nadu government to build a 13-acre data center park in Chennai). Both Mumbai and Chennai also host undersea cables connecting these key cities to Europe and Africa (boom).

While JLL predicts roughly 70 percent of near-term DC capacity buildout will remain in Mumbai and Chennai, Colliers says the whole of the MAHAPE regional belt, spanning from Mumbai to the IT hub of Pune, along with Belapur, Thane-Balapaur Road, and Panvel, may be promising sites for co-location data center expansion. This is due to the availability of new land, a new airport, a trans-harbor link, and relative proximity to the all-important undersea submarine internet cables.

Colliers Capital Markets & Investment Services Team projects an approximate six-year break-even timeline for prospective co-location data centers in those regions, taking into account input costs including land, building, operational expenditures, and equipment such as backup power, transformers and server racks.

Given the high barriers to entry, Colliers believes that data centers are a long-term play for investors seeking stabilized net yields in excess of 15 percent per year.

And yes, 5G

The global buildout of 5G technologies will also boost demand in India. Colliers expects 5G-enabled digitalization revenues to touch USD 17 billion by 2030, predominantly impacting India’s manufacturing and healthcare sectors, as well as emerging fields like agriculture and urban mobility.

Swedish telecom equipment maker Ericsson’s 2020 Mobility Report, released this summer, predicts 5G will represent around 18 percent of India’s mobile subscriptions by the end of 2025, generating $17 billion in economic revenues for the country by 2030.


Challenges exist. While the sheer number of Internet users in India ranks topmost in the world, its fixed broadband speed is subpar, ranking 74th among 174 nations with an average download speed of 43 mpbs (compared to a global average of 84.3 mbps). Its regulatory framework is arduous. India’s power supply is notoriously given to fluctuations and subject to volatile fuel prices, leaving many reliant on generator power. And the electricity-intensive nature of data center operations may cross with clean energy and sustainability targets set by many leading tech firms.

But, citing their team’s analysis and discussions with leading operators in India, Collier’s says the industry is expecting a wave of further incentives, including standardization of tax rebates across states — including lower taxes on equipment and imports to reduce capex — as well as incentives to provide uninterrupted power at affordable costs, similar to those that the state of Telangana recently offered to attract EV manufacturers to its largest city and technology hotbed, Hyderabad.



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