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South India's data centre market is on an impressive growth trajectory, with major cities like Chennai, Bangalore, and Hyderabad at the forefront. This surge is supported by substantial government incentives, strategic infrastructure investments, and a rising demand for digital services. The region is poised to play a crucial role in the global data centre landscape, with capacity projected to grow 65% by 2030.

Significant Capacity Expansion

As of now, the combined installed data centre capacity in Chennai, Bangalore, and Hyderabad stands at approximately 200 MW. This foundation is set to be significantly bolstered, with 190 MW currently under construction and an additional 170 MW planned. These developments are expected to increase the total capacity by 80% over the next few years, underscoring the region's strategic importance in supporting global digital infrastructure.

City-wise Data Centre Dynamics

Chennai is a prime data centre hub due to its strategic coastal location, offering excellent submarine cable connectivity. The city has an installed capacity of 87 MW, with 156 MW under construction and 104 MW planned. The favourable climate and robust power infrastructure make Chennai an attractive destination for data centre investments.

Bangalore, known as the Silicon Valley of India, leverages its strong IT ecosystem. The city currently has an installed capacity of 79 MW, with 10 MW under construction and 26 MW in the planning stages. Bangalore's technological prowess and availability of skilled workforce are key drivers for its growing data centre market.

Hyderabad is rapidly emerging as a data centre hotspot, thanks to proactive government policies and excellent connectivity. The city has an installed capacity of 47 MW, with 20 MW under construction and 38 MW planned. Hyderabad's competitive real estate market and robust infrastructure are significant advantages.

Data Centre Market Data - Capacity

Government Incentives and Policy Support

State governments in Tamil Nadu, Karnataka, and Telangana have been instrumental in fostering data centre growth through a range of incentives:

Subsidies and Tax Benefits: Substantial subsidies on land acquisition, reduced power tariffs, and significant tax breaks are provided to make South India an attractive destination for data centre investments.

Infrastructure Development: Investment in power and telecommunications infrastructure ensures high-speed, reliable connectivity, a critical component for data centre operations.

Ease of Doing Business: Simplified regulatory frameworks and expedited approval processes reduce bureaucratic hurdles, encouraging swift project initiation and completion.

Dedicated data centre policies introduced by various states provide a clear, structured framework for investors, enhancing the region's appeal.

Diverse Occupier Landscape

The occupier landscape in Chennai, Bangalore, and Hyderabad is diverse and dynamic. According to recent data, BFSI dominate the market, accounting for nearly 35% of total occupancy. IT firms follow with 30%, while Hyperscalers occupy 20% and other sectors constitute the remaining 15%.

Occupiers are increasingly seeking additional services to optimize their operations, which include:

Managed Services: Comprehensive IT management solutions that enable businesses to focus on core activities.

Security Solutions: Advanced security measures such as encryption, threat detection, and incident response services.

Disaster Recovery: Robust disaster recovery solutions ensuring business continuity in the face of unforeseen events.

Edge Computing: Proximity to end-users to reduce latency and improve service delivery, essential for IoT and real-time data processing.

Competitive Pricing and Service Offerings

The monthly recurring charges for data centres in South India are competitive, ranging between 6,650 – 8,500 INR/kW/Month according to the usage, offering significant value for money given the advanced infrastructure and extensive range of services provided. This competitive landscape ensures continuous upgrades and enhancements by service providers, meeting the evolving needs of occupiers.

Outlook

The outlook for South India's data centre market in Chennai, Bangalore, and Hyderabad is exceedingly positive. The combination of strategic location, robust government support, and technological advancements positions these cities as pivotal players in the global data centre industry.

Demand for data centres is expected to rise continually, driven by increasing cloud service adoption, digital transformation initiatives by enterprises, and the advent of new technologies such as 5G and IoT.

South India's data centre market, particularly in Chennai, Bangalore, and Hyderabad, is set for substantial growth, underpinned by significant investments, strategic government incentives, and a diverse occupier base. The competitive pricing, advanced infrastructure, and additional service offerings make these cities attractive destinations for data centre investments. As South India continues to develop its digital infrastructure, it is poised to play a pivotal role in the global data centre market, offering immense opportunities for investors and occupiers alike.

“The anticipated 80% increase in data centre capacity by 2030 across Chennai, Bangalore, and Hyderabad highlights the region's growing strategic importance in the digital infrastructure ecosystem, with sustained government support and continuous infrastructure development, South India is set to become a global data centre hub.”, says Swapnil Anil, Executive Director & Head of Advisory Services, India

Chennai Data Centre Ecosystem

Of the South Indian State, Tamil Nadu State witnessed a positive growth and revive & contribute heavily to India’s GDP. It's evident that the Southern metropolis always has been a ‘favourable’ investment destination and has a significant proportion of investment proposals of INR 50,000+ crores.

Comparing the industrial ecosystem, Tamil Nadu, always been leading in automobile, wind energy, and electronics hardware manufacturing sector. However, in the recent years, due to the stable system of governance and its related policies, Tamil Nadu, especially the Chennai region has emerged as a data centre capital of India.

The government is also proactive in providing 24/7 power facilities, followed by land, connectivity infrastructure for DCs, fiscal & non-fiscal incentives, and promoting renewable energy use for everyday management. This has created a supportive technology bubble and also acts as a catalyst for industries to set up data centres.

It has to be noted that Tamil Nadu was the 1st state to come up with ethical AI, blockchain, and cyber security policies in the country. And Chennai is already geared up to provide a ready, built and well-established supply chain for data centres to integrate scale within the region.

Chennai is a prime data centre hub due to its strategic coastal location, offering excellent submarine cable connectivity. The favourable climate and robust power infrastructure make Chennai an attractive destination for data centre investments. Chennai is also a popular option for DC colocation firms since it provides an abundance of experienced IT & Non-IT talent, along with strong manufacturing bases and lower setup costs. As a whole, the city is an excellent location for data centers because of its attractive cost structure and ample land supply.

“Chennai data centre market exemplifies the city's commitment to technological advancement and innovation. With its strategic coastal location, robust government initiatives with respect to the Industrial Policies and sector specific Policy for Data Center including the Cyber Security, followed by the support infrastructure facilities and availability of developable land parcels at low cost, Chennai will continue to drive and lead the digital economy forward.”, said Umakanth Y, Senior Director, Advisory Services, Colliers India.

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