Mumbai, Hyderabad lead the charge in AI data centre boom

The cities of Mumbai and Hyderabad are leading the charge for data centre investments as artificial intelligence is fuelling big expansion in the country with companies announcing huge plans recently, even as Chennai and Delhi-NCR remain the key markets.

Existing data centre regions, connectivity, power supply, water supply, talent availability, seismic zone status, proximity to business hubs, government initiatives and latency requirements are among several factors working in favour of these two cities, analysts told ET.

Amazon Web Services (AWS) last week announced its plan to invest $8.3 billion into cloud infrastructure in Mumbai. AWS is also investing Rs 60,000 crore in data centres in Hyderabad. CtrlS Datacenters, also last week, announced plans to set up a new data center park near Hyderabad with a potential IT load capacity of over 600 MW. Sify plans to invest Rs 3,000 crore towards the growth and expansion of data centres in India, while STT Global Data Centres India (STT GDC India) has signed an agreement with Telangana for a Rs 3,500 crore investment to develop a data centre campus in Hyderabad.

According to a report by Cushman and Wakefield, by 2028, India will have three times of its current installed capacity in data centres with a total IT load of 3.29 GW. Mumbai currently accounts for 54% of all existing installed capacity. Hyderabad is likely to join the current top-three markets of Mumbai, Chennai and Delhi-NCR due to several under-construction and planned developments, it said.

"Maharashtra’s appeal is very clear — it is a major hub of large corporate headquarters and the financial capital having a majority of the financial institutions headquartered here. Plus, it has a growing tech sector in its suburban satellite cities like Navi Mumbai and Thane, and its sister city Pune already attracts significant global insourcing centre investments from large Fortune 500 global companies," Gartner senior director analyst Naresh Singh said.

On the other hand, he said, Hyderabad is in the relatively earthquake-safe Deccan plateau and a central location of India (even though it considers itself southern India). Hyderabad has always been looked at as a favourable city to establish a disaster recovery centre — as it is equidistant to all the major cities of India such as Mumbai, Delhi, Bengaluru, Chennai and even Kolkata in the East.

For data centres, the most important factor is the location – how easy it is to access for customers; doesn’t have to always be the distance, but the access to it must be assuring enough, he said. Availability of energy is the other biggest factor, the importance of which is only going to grow as workloads like that of AI that draw significant wattage make their mark in India.

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According to various analyst reports, India's data centre industry is experiencing unprecedented growth, with capacity expected to reach 1,800 MW by 2026, CtrlS Datacenters said.

Hyderabad has emerged as a premier hub in India, with CBRE's Datacenter Trends report highlighting it as one of the fastest-growing data centre markets in the country. Its seismic zone-2 status makes it particularly attractive for disaster recovery services.

Prabhu Ram, VP - industry research group at CyberMedia Research, said the next wave will come as more data centres move away from the metro cities.

"While urban India continues to be the primary hub for data centre development, there is growing interest in establishing centres in aspirational India — beyond tier-I cities — tapping into untapped potential for further growth," Ram said.

Currently, only 5-6% of data centres reside in tier-II and tier-III cities. The focus over the next few years will be setting up 'edge centres', which are smaller facilities located closer to the population being served, experts said.

"These facilities are expected to manage the growing data traffic from tier-II and tier-III cities and support applications like OTT (over-the-top) platforms, IoT (Internet of Things) devices, gaming, smart cities, etc., with reduced latency and a better consumer experience," said Munira Loliwala, vice-president, strategy and growth, at TeamLease Digital.

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