Digitalisation And AI Create Expansion In Real Assets – Data Centres And Warehousing Will Witness Growth
Digitalisation has become a key driver for the Indian economy. With work patterns, supply chains, and consumer needs becoming more technology-driven, the demand for digital infrastructure has expanded immensely in recent years. Propelled by the rising digital economy and the rapid adoption of technologies, such as AI, the data centre sector in India is emerging as a popular alternative asset class. The industry witnessed an expansion from 350 MW in 2019 to 853 MW in 2023 and is further projected to reach 1,645 MW by 2026. To achieve this exponential increase in capacity, the industry will require 10 million sq. ft. of real estate space and is estimated to attract $5.7 billion in investments.
The growing digitalisation and increasing internet user base in India have also resulted in an e-commerce boom, driving the demand for an efficient supply chain infrastructure. As such, the warehouse sector in the country is projected to reach $35 billion by 2027, at a CAGR of 15.6% from 2022.
Going forward, most developers are looking to leverage the power of AI and IoT to create a ‘phygital’ warehousing infrastructure to optimise efficiency and reduce labour costs. Reports suggest that more than 80% of warehouses in India will integrate varied levels of automation by 2030, positioning the sector as an attractive opportunity for investors in the digital landscape.
Global Investors Will Forge Strategic Partnerships To Tap Opportunities Within Alternatives Sector In India
Government reforms and policies, such as the authorisation of REITs and InvITs as viable investment vehicles for foreign portfolio investors, have been instrumental in increasing their participation in India’s alternatives industry. This development opens up significant opportunities in the financial sector, attracting global institutional investors to form strategic partnerships with Indian real estate developers. As a result, the office space portfolio in the country is expanding, with Global Capability Centres seeing a notable increase in their share of total office real estate transactions, rising to 35% in 2023 from 25% in 2022. The domestic GCC market is projected to reach $110 billion by 2030, highlighting the sector’s potential.
Mixed-use developments present another lucrative opportunity for investors as Indian communities increasingly access to daily conveniences, proximity to prominent education and healthcare facilities, and the presence of a like-minded community. These factors make mixed-use developments a compelling investment, reflecting the growing demand for integrated living spaces.
The healthcare sector is also ripe with opportunities. Together with the diagnostic segment, it has attracted almost $9.8 billion of India’s FDI equity inflows between April 2000 and December 2023. The sector is poised for further growth, driven by increased health awareness, improved access to health insurance, a burgeoning middle class with rising income levels, and escalating government spending on healthcare.
The increasing number of high income individuals are also contributing to the rise of luxury developments such as branded residences, penthouses, sky villas, and independent floors within well-equipped townships with sales quadrupling at a 75% YoY increase.
The upward trend is not restricted to this segment; as per reports, hotel investments in India surged to $401 million last year, marking an almost fourfold increase from the levels seen in the previous year.
Global investors are also betting big on India’s renewable energy projects. With 100% FDI permitted by the government, the sector received foreign equity investment of $ 6.1 billion between April 2020 and September 2023. By supplying the capital the renewable energy industry in India needs, foreign investors are hoping to leverage the country’s innovative technology for healthy financial returns.
India’s market leadership hinges on favourable geopolitics, yet staying attuned to international markets and embracing innovative approaches is vital for sustenance.
While the tremendous growth prospects in India’s alternative investment sector are undeniable, achieving sustained global dominance will require a paradigm shift in the industry’s approach.
Asset managers must proactively anticipate and adapt to the rapidly evolving investment landscape, moving beyond traditional strategies. This necessitates embracing a data-driven mindset, leveraging advanced analytics and AI to identify emerging trends and tailor offerings accordingly.
Moreover, fostering an innovation-centric culture that encourages experimentation and calculated risk-taking is crucial to stay ahead of the curve. Ultimately, the Indian alternative investment sector’s global dominance depends on its willingness to continuously disrupt itself, enabling it to fully harness the nation’s economic potential and attract sustained investment.