Tier-2 Cities Attract Real Estate Developers for Edge Data Centers
The growing demand for edge data centers is drawing real estate developers to Tier-2 cities, which offer cost-effective land and proximity to local users.
Data CentersReal EstateEdge Data CentersTier2 CitiesSustainable PracticesReal Estate NewsJun 02, 2025
According to a Colliers report, India’s data center capacity has grown more than fourfold over the past six to seven years, reaching 1,263 MW as of April 2025. It is projected to exceed 4,500 MW by 2030, with investments amounting to USD 20-25 billion. On the supply side, India has added 859 MW of capacity across its top seven primary data center markets since the start of 2020. Geographically, 44% of this new capacity has been concentrated in Mumbai, while Chennai and the Delhi NCR region together account for 42% of the additions since 2020.
The shift towards Tier-2 cities is not just about cost savings. These cities offer a strategic advantage in terms of proximity to local users, which is crucial for edge data centers designed to minimize latency and provide real-time data processing. This is particularly important for applications like autonomous vehicles, smart cities, and augmented reality, which require ultra-low latency and high reliability.
Real estate developers are also attracted to the lower operational costs and the potential for higher returns on investment in Tier-2 cities. The availability of skilled labor and supportive government policies are additional factors driving this trend. For instance, many Tier-2 cities have implemented initiatives to attract tech companies and data center operators, offering tax incentives and streamlined regulatory processes.
However, the rapid expansion of data centers in Tier-2 cities also raises environmental concerns. The high energy consumption and carbon footprint of data centers are significant issues that need to be addressed. Many developers are focusing on sustainable practices, such as using renewable energy sources and implementing energy-efficient technologies, to mitigate these environmental impacts.
In conclusion, the trend of establishing edge data centers in Tier-2 cities is expected to continue, driven by the growing demand for low-latency, high-performance data processing. Real estate developers are well-positioned to capitalize on this opportunity, provided they can navigate the challenges and embrace sustainable practices.
Frequently Asked Questions
What are the key advantages of building edge data centers in Tier-2 cities?
The key advantages include cost-effective land, proximity to local users, lower operational costs, and supportive government policies. These factors help in reducing latency and improving real-time data processing.
How has India's data center capacity grown over the past few years?
India’s data center capacity has grown more than fourfold over the past six to seven years, reaching 1,263 MW as of April 2025. It is projected to exceed 4,500 MW by 2030.
What are the environmental concerns associated with data centers?
The high energy consumption and carbon footprint of data centers are significant environmental concerns. Developers are addressing these issues by using renewable energy sources and implementing energy-efficient technologies.
What initiatives are Tier-2 cities implementing to attract data center operators?
Many Tier-2 cities are offering tax incentives and streamlined regulatory processes to attract tech companies and data center operators. These initiatives aim to create a favorable business environment and promote economic growth.
What is the projected investment in data centers by 2030?
Data center investments in India are projected to reach USD 20-25 billion by 2030.
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