Artificial Intelligence (AI) is expected to add 500 MW to India’s data centre capacity over the next four years, according to a report by Avendus Capital. India’s data centre market, among the fastest-growing globally, has seen capacity rise from 540 MW in 2019 to 1,011 MW in 2023.
With a projected CAGR of 26% over the next three years, the sector is attracting diverse investors. The rise in AI workloads, anticipated to surpass traditional cloud computing, is set to increase data centre demand significantly.
Hyperscalers in India are increasingly building and owning tailored data centres, driven by long-term growth prospects and data sovereignty regulations. Prateek Jhawar of Avendus Capital noted that developers can expect over 25% IRR with a build-and-sell model, with India’s data centre capacity predicted to reach 2 GW by 2026.
Currently, 94% of data centre capacity is in India’s top seven cities. Mumbai is expected to account for 40% of new capacity, Chennai 25%, and Delhi 15% over the next five years. The sector is seeing increased investment, with long-term commitments exceeding USD 250 million per investment.