India’s data centre capacity to increase 66% by 2026, fueled by AI and $3.8 bn investment: JLL

India’s data centre (DC) industry is on a growth trajectory, driven by the increasing adoption of artificial intelligence (AI) and the rollout of 5G technology. According to real estate firm JLL India, the sector is expected to add 604 MW of capacity between the second half of 2024 and 2026, bringing the total capacity from 917 MW to 1,521 MW.

The future expansion of DC industry till 2026 will require approximately 7.3 million sqft of real estate and a capital investment of $3.8 billion, Samantak Das, chief economist and head of research & REIS, India, JLL, said, in a statement.

The Indian government’s approval of a $1.24 billion (₹10,732 crore) investment in AI infrastructure is expected to further accelerate the sector’s expansion. AI-ready infrastructure, combined with 5G, is anticipated to play a transformative role in India’s digital ecosystem.

Mumbai is expected to maintain its position as the leading market for data centres, while Chennai and other regions are likely to experience significant growth. Navi Mumbai is emerging as a strategic location, bolstered by its potential to meet growing demand.

“India is becoming a global centre for AI innovation and data centre development. Hyperscalers are increasingly pursuing self-build projects in major data centre hubs, while operators are planning new campuses powered by 400 kVA lines to support AI clusters. Navi Mumbai, in particular, is emerging as a key hub, with potential demand projected at 800 MW,” said Rachit Mohan, APAC Lead – Data Centre Leasing, JLL.

The industry has already shown robust growth, expanding 2.5 times over the past 4.5 years (2019-H1 2024) at a compound annual growth rate (CAGR) of 24%. In the first half of 2024, the sector reached a capacity of 917 MW, with an occupancy rate of 873 MW, indicating tight supply conditions.

The ongoing growth is also creating demand for skilled professionals and stimulating related industries, contributing to economic development. The growth of the data centre industry is poised to strengthen India’s digital infrastructure and foster innovation across various sectors, the report added.

In August, a report by Avendus Capital said that India's data centre capacity is set to grow by 500 megawatts (MW) over the next four years, driven by increasing artificial intelligence (AI) workloads. The report highlighted India's rapid growth in the data centre market, with capacity rising from 540 MW in 2019 to 1,011 MW in 2023, and forecasts an annual growth rate of 26% over the next three years. The report also identifies AI as a key catalyst for growth and highlights considerable investment prospects within the sector, drawing attention from private equity firms, pension funds, and sovereign wealth funds.

Experts believe that recent AI-focused investments by domestic companies such as AdaniConnex, Reliance, Sify, Yotta, PDG, and CtrlS will further facilitate capacity expansion and elevate India’s status as a leading global hub for data centres, thereby promoting innovation and attracting significant international investments.