Indian data centres: 7 key trends

Data centres are on the rise in India. Tier II cities such as Patna, Jaipur, Lucknow, Ahmedabad, and Bhubaneswar are already in demand to set up facilities to manage growing data traffic

India’s data centre market continues to grow robustly, with the total capacity projected to rise to 2 GW by 2026. There is nearly 525 MW capacity under various phases of construction across top cities such as Mumbai, Chennai, Hyderabad and Bengaluru. Cloud computing, technology advancements, 5G rollouts and the digitalisation of BFSI (banking, financial services, and insurance) continue to be the demand drivers with Artificial Intelligence (AI) workloads to ramp this demand up further. These growth drivers are projected to push the India data centre market value to $11.6 billion by 2032.

Data centres have also emerged as an attractive asset class for institutional investors in the last few years, with a large capital pool being committed and deployed in this sector. The industry has seen advancements on various fronts and will continue growing exponentially in the next three years.

Here are some of the key trends to look out for in 2025:

Data centre operators are increasingly investing in large-scale projects with capacities of over 100 MW, specifically in Navi Mumbai. Chennai is another preferred market for data centre operators to set up facilities. Hyderabad will also see significant hyperscaler capacity development in the next few years, with two major hyperscalers — each with more than 100 acres of land — having projects in various stages of development. With the increase in cloud computing and large-scale AI-led demand, the industry will see various large campuses to house this growing demand.

Due to scarcity of suitable land parcels and the exponential rise in land prices in the existing data centre (DC) clusters, the focus is on exploring alternatives slightly away from the conventional hubs in these cities.

India’s AI market is expected to grow at a CAGR (compound annual growth rate) of over 20% between 2023 and 2028. This will strengthen the DC demand. With increasing AI workloads, DCs are becoming increasingly dense and power-consuming. The average rack density, which is the quantity of power consumed by a server rack in a data centre and the power needed for cooling, is anticipated to increase.

To incorporate AI-led changes, the industry is gearing up for the adoption of newer, more energy-efficient technologies. This includes incorporating techniques like liquid immersion cooling, which offer significant power efficiency and substantial cost savings. The upcoming hyperscale and purpose-built AI data centres are expected to adopt this technology.