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Karnataka is set to be a premium data centre (DC) destination in India, said a recent CBRE report. The report said, with the DC policy in force, Karnataka is anticipated to lead as one of the top digital economies in the country, while Bengaluru to remain at the epicentre with hyper-scale DC demand.

CBRE has announced the findings of its latest report, ‘Karnataka to be the ‘data center destination of choice’. As per the report, backed by the latest dedicated Data Center (DC) policy, the DCs in Karnataka are expected to expand exponentially in view of a proactive policy push and owing to the enabling existing digital infrastructure in the state.

The growing potential of big data, Industry 4.0, 5G, and cloud computing will drive DC demand in the state together with the expanding Indian OTT streaming industry, which is expected to grow at a CAGR of 22-25%, and the media and entertainment industry, which is likely to grow at a CAGR of 10-12% by 2030, as per industry estimates.

As per the CBRE report, several factors, including technology hub, strategic location, power surplus, skilled talent, industrial growth, favorable policies, and low environmental risk, endorse Karnataka as a premium DC destination.

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Other government sops applicable across Karnataka, including power tariff concession, land subsidy, incentive on investments, and exemption on stamp duty, are likely to attract DCs in the state as well.

CBRE report stated that several initiatives by the central government will lead to data localisation, aided by the National E-commerce Policy 2019 and Personal Data Protection Bill 2018 that would restrict cross-border data flow.

Furthermore, the grant of infrastructure status in budget 2022-23 will give impetus to DCs in Karnataka. Additionally, Karnataka Digital Economy Mission which aims to create one million jobs by 2025 and targets $150 Bn in IT exports, would bolster demand for digitalisation and data storage requirements in the state, particularly in Bengaluru.

Why Bengaluru to Lead DC Growth In Karnataka?

DC capacity requirements would emerge from the rapid growth of the cloud providers in the coming years, thereby creating demand for hyper-scale DCs in Bengaluru. Taking into account the city’s classification as the second-most preferred technology destination in APAC and as the knowledge capital and IT hub, which accounted for nearly 40% of India’s total software export in 2020-21, India’s Silicon Valley, Bengaluru, will be the prime beneficiary of Karnataka’s DC policy.

The latest CBRE Q2 research shows that the city has ~100 MW of DC capacity, the second-largest in India. Moreover, Bengaluru is designated among the top 30 start-up ecosystems globally. As per the CBRE report, a dedicated DC policy will facilitate additional sustained institutional investment in the medium to long term and strengthen demand for DC, especially in Bengaluru.

As a technology, R&D, and shared services platform pioneer, the city will lead in attracting operators and investor interest in the DC space. An established IT hub of India and an industrial stronghold, Bengaluru is also the largest office market in the country, with about 30% of the overall leasing in the past five years.

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Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, “Karnataka’s digital economy is bound to accelerate, and the state is being envisioned as becoming the most popular choice for setting up DCs, given the robust existing digital infrastructure besides an integrated favorable policy ecosystem and civil infrastructure. This undoubtedly positions Karnataka as a data center destination of choice that will attract investments, and Bangalore will be a dominant turf for DCs in Karnataka. The DC policy, which targets investments worth INR 10,000 crore and aims to double the existing capacity to 200 MW by 2025, will alter the real estate contours in the state as supporting infrastructure will require to be future-ready with ESG compliance.”

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