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Real Estate

Data Centres - The Bright Spot?

How can India adapt to the rapidly rising demand for data?

7 MIN READ April 26, 2023

Written by Rory Hickman 

Industry leaders from across India gathered both online and in person in Mumbai on March 23rd for a GRI Hybrid Club Meeting to discuss the future of Data Centres in the country. Co-hosted by Club Partners Khaitan & Co and PwC, the event provided the attendees with an opportunity to discuss insights and strategies about the challenges facing the sector, including the impact of AI and the cloud on energy requirements, cybersecurity, environmental concerns, the importance of location, among many other topics.

The Data Demand Dilemma

Microsoft Data Centre in India. Data centres are critical pillars of infrastructure that play a vital role in enabling the digital ecosystem. Photo credit: Raimond Spekking - Creative Commons Licence (https://creativecommons.org/licenses/by-sa/4.0/deed.en)  GRI Club. Data Centre. India. Digital Ecosystem
Data centres are critical pillars of infrastructure that play a vital role in enabling the digital ecosystem. (Image: Raimond Spekking)

Data centres are critical pillars of infrastructure that play a vital role in enabling the digital ecosystem. As both India and the world at large continue to experience explosive growth in data consumption, the need for data centres is becoming increasingly important. With advancements in technology and the growing demands of operations, there has been a significant rise in the number of Data Centres in India in recent years. OEM Manufacturing has also shifted to India in a large way, further driving demand for data centres.

A key issue raised by participants at the event was the exponential swell in demand for data resulting from increased adoption of Cloud computing, the spike in popularity of streaming services during the pandemic, the rollout of 5G services, and the rapid release of a number of data-intensive AI-based applications such as ChatGPT and Dall-E. This snowballing growth in data requirements puts immense pressure on Data Centres and the related infrastructure.

Energy consumption needs that could once be met within the kilowatt (kW) range are now demanding supply in the Megawatt (MW) range, and this level is quickly expected to become insufficient as requirements reach the Gigawatt (GW) range. Attendees shared their predictions that energy needs are likely to reach the range of 1.7 GW within the next 3-5 years, while levels as high as 4-5 GW of capacity are already on the not-too-distant horizon.

As the energy demands of Data Centres increase, they of course become more expensive to operate. However, India is still cheaper than other countries, making it an attractive location for companies to establish properties. The growth in the digital payment space has also generated a lot of interest in setting up Data Centres in India. 

Prices in the USA and EU are comparatively much higher and are increasing far faster, which gives India the opportunity to capture more of the market, but costs are expected to increase rapidly and India must remain cautious of becoming too expensive and harming the sector. 

Infrastructure, Investments and Innovation

Members of GRI Club India gathered to discuss the future of Data Centres in the country GRI Club. India. Data Centres. Real Estate. Infrastructure. Meeting. Conference. Mumbai. GRI Hybrid Club Meeting (Image: GRI Club)

To meet the growing demand, India needs to invest heavily in Data Centres, and this will require collaboration between the government and the private sector. The government needs to provide incentives to attract more investments in the sector, while private companies need to focus on innovation and providing value-added services to their customers.

After the 2008 financial crisis, VCs have shown far less willingness to fund infrastructure in-house, so there is a need for providers who offer a full suite of services and their installation. Multiple Cloud servers are increasingly required to meet the growing demands of operations, and larger organisations have demonstrated a preference for partnering with big public companies rather than private entities.

According to the business leaders discussing the subject, Microsoft is currently the only provider of a full suite of services, but Google is catching up. The presence of big tech players such as Microsoft and Google will drive innovation and growth in the Data Centre space in India.

With the rise of new technologies, the future of scale is uncertain, and infrastructure requirements may change. Hence, Data Centre operators need to focus on building future-proof buildings and centres that can adapt to the changing requirements of the industry. This will require innovation in cooling systems, energy-efficient technologies, and advanced fire safety measures.

One solution to the cooling problem is to adopt new technologies that are less energy intensive, such as cold storage or heat syncs. Additionally, higher workloads can be processed on smaller servers, which could be more efficient than building a large, single-purpose server. However, these innovations are often developed in silos, making it difficult to adopt them at scale.

Location, Location, Location

Mumbai's iconic tourist attraction - Queen's Necklace Marine drive at night. Mumbai, Maharashtra, India. Mumbai and Chennai are still the leading destinations for Data Centres as they continue to have the best policies and understanding of the market, while also offering ample power supply infrastructure and services. Photo credit: f9photos | envato GRI Club. India. Data Centres. Real Estate. Infrastructure. Meeting. Conference. Mumbai.Mumbai and Chennai are still the leading destinations for Data Centres (Image: f9photos | envato)

Real estate considerations play a significant role in the establishment of Data Centres. Due to the high energy and cooling requirements, sites need to be chosen carefully to ensure a reliable power supply. Beyond the ever-complicated issue of land acquisition, the topography of locations is another key consideration. The location must ensure high-speed connectivity and accessibility, should be close to major cities, and the climate must be suitable for data centre operations.

Mumbai and Chennai are still the leading destinations for Data Centres as they continue to have the best policies and understanding of the market, while also offering ample power supply infrastructure and services. The difficult question is why companies would choose other cities and how to encourage growth in other locations.

Tier 2 cities offer the benefit of lower real estate prices, but sometimes at the cost of infrastructure limitations. Data Centres are not the most energy-intensive asset class, but they do require a reliable power supply, advanced cooling systems, and efficient backup power systems to ensure minimal downtime.

To aid in this endeavour, the government has undertaken initiatives to improve power grid infrastructure across the country, and there has been strong support for renewable energy projects. These developments have the potential to encourage Data Centre operators to expand to other locations but the government must continue to provide support, incentives for investment, and promote infrastructure development.

New cable system installations and cable landing stations (CLS) are required to connect data centres to the rest of the world and provide high-speed connectivity to operate efficiently. The government's initiative to install new submarine cables in the country will also help data centres to expand to other locations.

Sovereignty, Security and Sustainability

Mumbai's iconic tourist attraction - Queen's Necklace Marine drive at night. Mumbai, Maharashtra, India. Mumbai and Chennai are still the leading destinations for Data Centres as they continue to have the best policies and understanding of the market, while also offering ample power supply infrastructure and services. Photo credit: f9photos | envato GRI Club. India. Data Centres. Real Estate. Infrastructure. Meeting. Conference. Mumbai.Some doubts remain about national security and sovereignty issues covered in the Indian government's 2022 Digital Personal Data Protection Bill. (Image: LittleIvan | envato)

While India has long been a global hub for data centres, international competition is growing rapidly. China offers some benefits due to low costs and the option of building in colder regions, which reduces cooling requirements and energy costs, but the required infrastructure is less mature than that in India. Japan is also a strong contender in the market and has undertaken a number of projects to increase its data services in the Asia-Pacific region.

Singapore is notable for having taken on a large share of data that was once housed in India and currently sees many popular services running through the country. Although the goal of the Indian government and businesses is to bring this data back to India, data localisation and data sovereignty are difficult issues in a globalised world. 

India GRI 2023

Germany, for instance, has implemented a hub and spoke model in which multinational companies are given the choice of keeping German data in-country and the rest in Amsterdam. France, Italy, and many other countries have begun to adopt similar models, an option which offers some benefits according to those in attendance at the event. 

The Indian government’s 2022 Digital Personal Data Protection Bill included measures to address these concerns in light of the 2019 bill which caused confusion regarding the protection of data generated in India before being processed or stored in a foreign country, although some doubts remain about national security and sovereignty issues covered in the document. 

The environmental impact of data centres is also a growing concern. While some data centres have achieved PUE (Power Usage Effectiveness) ratings of 1.08, which is very efficient, achieving this level of efficiency requires dedicated, single-purpose centres that are optimised for energy usage. Balancing the need for energy with environmental considerations is becoming increasingly important.

The Future of Data Centres

Surveillance cameras at high security data center. Some doubts remain about national security and sovereignty issues covered in the Indian government's 2022 Digital Personal Data Protection Bill. Photo Credit: LittleIvan | envato GRI Club. India. Data Centres. Real Estate. Infrastructure. Meeting. Conference. Mumbai.Thanks to everyone who participated in-person and online (Image: GRI Club)

Data Centres are becoming increasingly indispensable globally due to advancements in technology and the growing demand for data-intensive services. Apart from data, privacy, cloud applications, and 5G rollout, there are several demand drivers for data centres in India.

The industry needs to focus on building future-proof infrastructure that can adapt to the changing requirements of the sector, including cooling systems, energy-efficient technologies, and advanced fire safety measures. However, building data centres in India is not without its challenges. Government policies, power grids, and cybersecurity are just a few of the factors that must be considered going forward.

With the right approach and support, the Indian data centre sector can overcome these challenges and continue to grow. GRI events provide the perfect platform to come together and share the insights that can only be gained from belonging to a powerful network of industry leaders in order to achieve success. 

The next event coming up will be GRI Offices and Parks India 2023, taking place on June 22 in Mumbai, and be sure to sign up for the biggest real estate event in the country - India GRI 2023, taking place on September 20-21.
 

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