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The Indian realty sector, which has been battling a severe crisis for the last few years, has found a new segment of real estate to be profitable: data centres. Back in the era where SEZs were being developed rapidly, the commerce and finance ministries had come up with various benefits for the real estate companies venturing into the segment. Many of the major real estate players also demand for data centres to be classified as an infrastructure sector. This would enable the developers to enjoy better loan rates.
With more and more companies setting up offices in the major IT sectors in India, the demand for data centres is quite high. Despite the pandemic, which is causing severe losses to the other segments of real estate, data centres are expected to continue attracting sales. It is expected that by the end of this year, India would record investments worth INR 3.2 billion in total on data centres. The Union Ministry of Information Technology has agreed to introduce a special policy soon. Similar to the SEZ policy in the past, it would provide the developers with necessary support from the government and RBI.
Data centres can be developed by data centre operators or real estate companies. In India, they are mostly developed by the former. However, several leading real estate builders now want to venture into this field. Hiranandani Group is investing in a major data centre in Mumbai. Adani Realty would also be investing INR 90,000 crore in a data centre project in Andhra Pradesh.
Several requirements need to be fulfilled before developing a data centre. Adequate land to set up the towers is a must. Other important factors include a reliable and constant supply of power and water. Moreover, the land has to be located near major cities for sufficient power supply and workforce. Thus, running a data centre can be quite costly. The domestic data centre operators cannot beat the international ones in competition if they do not receive certain benefits. These benefits include various tax concessions and sops.
One of the major challenges that this sector would be facing is lack of power supply. Several states in India come with an unreliable power supply system, often with inadequate volumes of energy generated. In these cases, the data centre operators are switching to solar power in order to ensure a constant supply of power for the facilities.
For the last few years, the Indian realty sector has been undergoing a period of slowdown. Due to a fall in sales and the NBFC crisis, the developers faced a severe lack of credit. The problem has been aggravated further by the coronavirus pandemic. Home sales have fallen steeply as well. At this point, developing data centres can help the real estate builders recover. The use of the internet has increased greatly due to people working from home, which has led companies from various sectors such as cloud services to expand their operations by investing in more data centres.
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