India Ratings & Research expects 7.1 GW of new data centre capacity over FY26-FY28, with stable rental rates, rising capex and growing AI-related demand driving investments
Timely expansion of power infrastructure in India, especially distribution systems, would be a key consideration in ensuring power connectivity for super-large DC parks.
India’s data centre (DC) sector is estimated to have a total investment pipeline of Rs 1.6 trillion–2.0 trillion over the next five to seven years, according to a report by India Ratings and Research.
Demand for DC capacities is expected to keep pace with supply addition, providing stable to moderate growth in occupancies and rental rates.
DC companies have announced fresh capacity addition of a massive 7.1 gigawatts (GW). However, almost 60 per cent of this is still at a nascent stage, with 1.3 GW of capacities under execution and an additional 1.6 GW at the planning stage.
The capacity addition is estimated to accelerate to 300–350 megawatts (MW) per year over FY26–FY28, against the pace of 150–250 MW per year over FY22–FY25, to reach a total DC capacity of 2.4 GW by FY28. Capacity stood at 1.3 GW as of FY25.
The total capital cost for a DC stands at Rs 50–70 crore per information technology (IT) MW (excluding land and managed service/cloud capex). Of the total DC capex, real estate accounts for 20 per cent; the rest goes towards mechanical engineering, plumbing, and related work.
Overall capex inflation grew at a 5–10 per cent compound annual growth rate (CAGR) over FY21–FY25. This was manageable, given rental rate escalations kept pace with capex inflation, contingency and planning, and the long execution time frame for DCs (three to four years). However, any exposure to artificial intelligence (AI) workload would substantially increase overall capex costs, given the higher cooling and technology requirements.
Further, according to Prashant Tarwadi, director, large corporates, India Ratings, rentals are estimated to grow at 3–5 per cent annually. Meanwhile, capex inflation is likely to hover around 5–6 per cent unless supply chain bottlenecks or geopolitical tensions arise.
“The hyperscaler players like Google, Amazon, etc are paying anywhere between $75 to $85 per kilowatt per hour per month. For an enterprise customer, it can be between $95 to $125 per kilowatt per hour per month,” Tarwadi said.
Further, AI workload is likely to bring transformational changes to DC demand contours. In the United States, large DC real estate investment trusts (REITs) have already committed significant investments to develop AI-ready DCs.
Additionally, timely expansion of power infrastructure in India, especially distribution systems, would be a key consideration in ensuring power connectivity for super-large DC parks.
Published – July 09, 2025
Source : https://www.business-standard.com/
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