Overview
Morgan Stanley convened a panel discussion with senior executives from Mindspace REIT, CapitaLand India Trust and Invest India to assess the current state and prospects for India’s data center market. Panelists agreed the sector has considerable potential, but several infrastructure-related constraints must be addressed for growth to accelerate.
Capacity and international comparison
The panel reported India’s data center capacity at about 1.4GW, which translates to roughly 1W per capita. For context provided during the session, that per-capita figure was contrasted with roughly 30W per capita in China and about 100W per capita in the United States. The implication offered by participants was that capacity remains materially lower in India on a per-person basis.
Infrastructure as the binding constraint
Panelists identified infrastructure limitations - rather than a lack of demand - as the principal bottleneck. Specific infrastructure challenges called out included:
- Power availability
- Grid stability
- Cooling systems
- Semiconductor supply chains
These areas were cited as key determinants of how quickly new facilities can be developed and made operational.
Demand dynamics and geographies of interest
Executives on the panel expected hyperscaler demand to stay strong, identifying Navi Mumbai, Chennai and Hyderabad as focal points for activity. The panel also contrasted development yields - citing roughly 15% for data center projects versus about 10% for office properties - while cautioning that pricing power for data centers remains limited. Accordingly, realized returns will be sensitive to execution quality and the structure of contracts underpinning projects.
Artificial intelligence and Global Capability Centers
The panel expressed a constructive view on the implications of artificial intelligence for India. Rather than projecting widespread job displacement, participants characterised AI as likely to enhance productivity, a stance they said would support continued expansion of Global Capability Centers in India. Those centers were noted to benefit from a 60-70% cost advantage, a large talent pool and favorable demographics, factors that together underwrite ongoing demand for IT and data-related infrastructure.
Takeaway
Overall, the discussion framed India’s data center sector as an industry with clear demand fundamentals but constrained by physical and supply-chain infrastructure. Where returns materialize will depend on resolving those constraints and on effective project execution and contractual terms.
Panel participants referenced in this report included executives from Mindspace REIT, CapitaLand India Trust and Invest India. The session was hosted by Morgan Stanley.