Indian Data Centre capacity set to reach 4 GW by FY30 with Rs 1.5 lakh crore investment: Report

This projected expansion marks a substantial leap for the sector, which has already seen its co-location capacity double to 1.2 GW between FY22 and FY25.According to a report by CareEdge Ratings, the anticipated capacity augmentation will require vast capital, while tenants are further expected to spend nearly double that amount on IT equipment, bringing the total investment potential to between Rs 3 lakh crore and Rs 4 lakh crore.

The sector continues to draw interest from domestic and international players due to India’s competitive advantages, including lower land and power costs compared to global peers. A rapidly maturing digital ecosystem and long-term contractual arrangements provide the industry with strong revenue visibility and stable cash flows.These factors contribute to high customer stickiness, ensuring that the massive capital outlays are met with sustained demand.

Recent data indicates that absorption levels remain above 90 per cent, reflecting consistent requirements from hyperscale cloud providers, enterprise clients, and the banking, financial services, and insurance segment.

Puja Jalan, Director CareEdge Ratings, said, “The industry is in an upswing with high capex, fundraising capability of strong sponsors and large equity investments targeted to the Indian Data Centre entities. The industry is likely to witness a revenue CAGR of 24% during FY26-30, with steady-state margins ranging between 40% and 42%. The AI-led demand shall catapult the growth story. However, power infrastructure support is critical to realise the industry’s potential. Also, the capability to manage cash flows amid rising costs and escalating commissioning timelines shall be key to sustenance.”

Despite the growth, the industry faces rising operational hurdles.

Data centre costs have climbed between 50 per cent and 70 per cent in recent years, driven by surging land prices and the adoption of advanced cooling technologies.Commissioning timelines also stretch due to changes in project scopes and delays in obtaining necessary clearances. To meet sustainability goals, providers increasingly turn to renewable energy and green data centre practices, which help improve Power Usage Effectiveness despite the higher initial investments.

“Global AI investments have crossed nearly USD 1 trillion between 2020-2025, with India witnessing strong momentum supported by government initiatives. While data centre demand is currently driven by enterprise IT and cloud storage, AI-led workloads are expected to power the next phase of growth over the next 5-7 years, with the pace of adoption in India linked to the timely scaling of high-performance Graphics Processing Unit (GPU) availability,” added Tej Kiran, Associate Director, CareEdge Ratings.