E-commerce policy draft may bring cheer to the realty sector

With the insistence on data centres to be onshore, entities in real estate believe there is going to be a rise in demand for specialised Grade-A commercial spaces to set these up.

More than online marketplaces and digital commerce, the draft e-commerce policy issued last week might help the real estate sector.

With the insistence on data centres to be onshore, entities in real estate believe there is going to be a rise in demand for specialised Grade-A commercial spaces to set these up.

Currently, data centres in India occupy around 12 million sq ft in space, growing at a compounded annual rate of 20 per cent.

The tagline of the draft report is ‘India’s data for India’s development’.

The policy states a time-frame would be put in place for transition to data storage within the country, with three years to allow industry to adjust to the requirement.

Sector experts estimate India will become the second-largest data centre market in Asia-Pacific by 2020.

According to a Gartner India study, the market doubled to $4.5 billion in 2018 from $2.2 billion in 2016, as more foreign companies sought to store data within the country.

“According to the government’s directive, many companies have stored payments data locally without mirroring it overseas.

"Currently, the data centre sector is in a nascent stage and stakeholders are strategising to best align with the ongoing trend.

"As the demand for these centres is rising, development of facilities are also gradually picking up, with investment from both domestic and international players,” said Abhinav Joshi, head of research at CBRE India, the commercial real estate and investment services entity.

He adds that Reliance Jio is will invest about Rs 1,000 crore to set up a data center in the upcoming Silicon Valley project in Kolkata.

Another data centre service provider, CtrlS, plans to invest Rs 2,000 crore to develop data centres in Mumbai, Hyderabad and Chennai.

“As of now, Grade-A facilities for data centres are limited. However, the significant investments from various market players indicates development of such facilities in the coming years,” Joshi added.

Sector experts believe with the power situation improving in smaller towns, new and smaller data centres might crop up in tier-II cities and other towns.

The centres have so far been mostly located in and around Bengaluru, Chennai, Hyderabad and Mumbai.

Cable landing stations, availability of uninterrupted power and availability of fibre are key decision drivers for setting up these centres.

“Mumbai has seen development of newer locations like Thane and Panvel, as also some migration towards Pune and its outskirts.

"Similarly, Chennai is witnessing a gradual move to the Sriperumbudur-Oragadam region.

"Data centre capacity in India is estimated to increase by almost 68 per cent from 2018 by the end of 2020.

"Ample electricity is now available for data centres through the national power grid,” says Niranjan Hiranandani, president of the realty companies’ body, Naredco.

However, some say operational challenges need to be addressed before this commercial real estate segment can see a boom.

In many cities, real estate costs are high.

“Coupled with infrastructure woes, there are operational challenges at most data centres - power, cooling, rack space, CPU availability and other infrastructure components such as UPS devices, HVACs, generators, branch circuits.

"These challenges continue to grapple the data centre industry,” said Anuj Puri, chairman at Anarock Property Consultants.

He adds the construction cost for a centre would be Rs 10,000 to Rs 18,000 a sq ft in carpet area.

Photograph: Francis Mascarenhas/Reuters