Power is the single largest hurdle for India’s data centre ambitions

India’s data centre industry stands at the cusp of a massive transformation, driven by digital adoption, cloud migration, and the AI revolution. Yet, beneath the growth story lies a complex reality; operators continue to grapple with land acquisition challenges, infrastructure gaps, and, most critically, power availability. In this exclusive conversation with Dataquest, Srihari Srinivasan, Director – Lead Transactions, Data Centre Services at Savills India, discusses the opportunities and bottlenecks shaping India’s data centre ecosystem, the rise of Tier 2 markets, co-location versus on-premises models, and why ecosystem alignment is essential for India to become a global hub. 

What is your role at Savills? What services does the firm provide, and can you set some context for us?

Savills is a global real estate services firm headquartered in London and listed on the London Stock Exchange. Our primary focus is on real estate consulting and brokerage, covering a wide array of asset classes such as commercial, industrial, retail, residential, project management, valuations, research, and consulting. Among these, we have a dedicated service line focusing on the data centre asset class, which I lead for Savills India along with my colleague, Anup Basant.

We primarily address the real estate side of the data centre business. On one side, we work with operators seeking to establish their campuses or facilities, either through outright acquisition or in some cases, via a build-to-suit or development model. On the demand side, once a data centre campus is operational, we support enterprise customers migrating their data management from on-premises to outsourced solutions, whether for primary usage or disaster recovery. That, in essence, is what we do in this service line at Savills.

You mentioned data centre asset management, with land being the primary asset. What complexities exist in land acquisition and approvals, and how do you help clients address them?

Most operators, in fact, almost all, prefer outright land acquisition rather than opting for a build-to-suit or development model. The rationale is control. Given the critical nature of the data they manage, often client data, any disruption translates into significant business risks. Direct ownership mitigates such risks better than leasing, which could introduce uncertainties.

Multinational firms entering India often struggle with local processes, approvals, and regulatory hurdles. They also need to establish dedicated teams, which is challenging since data centre operators are primarily IT companies, not real estate developers. While some set up large teams in India, many prefer lean structures.

This is where collaborations are emerging. Increasingly, operators are partnering with developers, either on a regional or pan-India scale. Developers acquire the land, undertake construction and infrastructure work, and then hand over the facility to the operator. Typically, an MoU governs this arrangement, often including an option for the operator to acquire the asset either immediately post-setup or after a few years. Such synergies have begun to surface in the past year, though it remains too early to assess their industry-wide adoption.

Government policies and regulations play a significant role in land acquisition and the sustainable development of data centres. Can you elaborate on this?

The central government’s policies, particularly the Data Protection Bill and data localisation requirements, initially propelled the demand for data centres in India. Beyond this, policy reforms specific to the sector have been limited. Certain states, such as Telangana, Uttar Pradesh, and Gujarat, offer subsidised electricity tariffs to data centres, recognising electricity as the most critical infrastructure requirement.

While these efforts are encouraging, only a few states have taken substantial steps. There is considerable opportunity for more states to capitalise on the growing demand for data centres, both from a land standpoint and more importantly from a power infrastructure standpoint, since power remains the most critical enabler.

What policy changes or new initiatives could further support the growth of the data centre industry in India?

At the state level, there is scope to introduce additional perks, including taxation incentives, although I will not delve into the technical details here. The two primary considerations for operators comparing India with Southeast Asian options are land availability and power supply, with power being the most significant.

India recorded 212 MW IT absorption in H1 2025, driven by hyperscalers and enterprise colocation demand. However, growth could accelerate if states focused on strengthening power infrastructure. India is cost-competitive, with subsea cable landing stations strengthening its appeal. Still, state governments must proactively establish dedicated teams to plan for specialised data centre clusters equipped with reliable power, cable landing connectivity, and allied infrastructure.

Currently, land may be available, but supporting infrastructure is often inadequate. Sites prone to flooding, locations too close to residential areas, or land too far from cities pose further challenges. Some states have provided land at subsidised rates or on deferred terms, but power remains the critical bottleneck nationwide. Meeting the enormous power demands of data centres is the single largest hurdle for India to unlock its full potential.

What economic factors are driving data centre growth in India?

Economically, India offers lower costs compared to many geographies. The presence of multinational corporations already established in India, combined with its skilled workforce across both blue-collar and white-collar categories, makes it an attractive destination.

Cloud providers and hyperscalers such as Microsoft Azure, AWS, and Google already have significant presence here and view India as central not only for domestic consumption but also for Southeast Asia. Compared with Malaysia, Thailand, or Taiwan, however, India still faces challenges around power availability. Nonetheless, India remains competitive in workforce, customer base, and subsea cable connectivity. The bottlenecks continue to be land and power.

Operators are now moving into Tier 2 and Tier 3 cities. What advantages do these regions offer in shaping digital infrastructure?

Demand in Tier 2 cities is growing, while Tier 3 remains premature. Operators are increasingly setting up smaller edge data centres in Tier 2 locations. This shift is driven by mobile applications, digital payments, content streaming, and overall rising digital adoption. The penetration of 5G and mobile usage has created the need for localised infrastructure to reduce latency and improve redundancy.

The main drivers are social media platforms, OTT services, banking applications, and large-scale streaming platforms. Contribution from local enterprises remains small, but the broader demand for low-latency experiences in Tier 2 locations is fueling the rise of edge data centres.

Co-location versus on-premises data centres is a recurring debate. What advantages does co-location provide?

Indian enterprises often express two apprehensions about co-location. The first is data security, given the sensitivity of client and operational data. The second, though less common, is concern among internal IT teams about job security.

Despite these concerns, the advantages are significant. Operating an in-house data centre is resource-intensive and costly, requiring ongoing investments in infrastructure and staffing. Co-location facilities provide enterprises with secure, robust environments at significantly lower costs, typically yielding savings of 20–25% or more.

Globally, in the US, Europe, the UK, and China, co-location is widely adopted. In India, adoption is growing steadily but remains in its early stages. Government encouragement, especially in banking, has accelerated the shift to outsourcing.

Co-location facilities also provide far superior security, power neutrality, and carrier neutrality compared to in-house setups, ensuring minimal downtime. Tier 3 and Tier 4 facilities, which dominate in India, deliver uptime levels as high as 99.99%, making co-location highly reliable.

With the rise of AI and ML, how is the Indian data centre ecosystem adapting?

 AI is transforming every sector and has major implications for data centres due to the immense computational power required. AI-enabled campuses, powered by GPUs and high-density racks, are now common. Nearly every operator today is positioning new developments as AI-ready.

Examples include Yotta’s partnership with NVIDIA through Articloud. While enterprises are still hesitant to adopt a large-scale approach, operators, leveraging economies of scale, make AI infrastructure more viable.

AI workloads also demand advanced cooling and higher power density. Operators are moving away from water-intensive cooling to innovations like liquid cooling. This is both sustainable and effective, addressing the challenges of high-performance computing.

How does Savills help its clients achieve business goals?

Our approach begins with understanding the client’s current setup and objectives. Requirements vary, some clients already host data centres but seek disaster recovery facilities, others require both DC and DR, and some seek to migrate from global platforms like Azure or AWS to local providers for cost reasons.

We map these requirements against available operators, float RFPs, evaluate responses, and work alongside clients to identify the most suitable solution. We assist them through migration, contracts, implementation, and ongoing support. This applies across industries, from financial institutions to manufacturing.

Sustainability is a growing concern globally. What are the environmental challenges for data centres, and how are operators addressing them?

The two main sustainability challenges are power consumption and cooling. Operators are optimising power efficiency while shifting away from water-intensive cooling methods toward liquid cooling.

Many are also targeting carbon neutrality by investing in solar farms and renewable energy solutions. Most new facilities are built with sustainability certifications such as LEED or IGBC, ensuring green practices from the construction stage itself.

Although India does not yet operate at the same massive scales seen in the US, operators here are proactively adopting sustainable methods to stay carbon conscious as they grow.

Looking ahead three to five years, how do you see this industry evolving, and do you believe India requires strong policies on data centres and data localisation?

Data is increasingly critical in every aspect of life, and demand is only rising. To position India as a global destination for investment, the data centre industry must be prioritised with strategic planning at both the central and state levels.

Key measures include faster clearances, easier access to quality land, reliable power supply, and accessible locations for operational convenience. While the sector is often discussed as a booming opportunity, on-the-ground challenges persist, particularly when compared to Southeast Asia, where markets are moving rapidly.

If addressed, India can serve both its vast domestic market and emerge as a cost-effective global hub for data management. Geographically and demographically, India has the potential to become a phenomenal centre for the industry.