The research highlights that India’s data centre expansion is no longer simply a question of adding digital infrastructure. As facilities become larger and more interconnected, operators are facing increasingly complex risks that can affect uptime, asset values and insurability.

Howden’s analysis calls for these risks to be addressed together — from site selection and design through construction and eventual operations — rather than being treated as separate property, construction, cyber and operational exposures.

Data Centre Power Consumption Rises 68-Fold

Power infrastructure has emerged as one of the most significant risk factors for India’s data centre sector.

According to S&P data cited by Howden, power consumed by data centres built in India increased 68-fold between 2016 and 2025, representing a 60% CAGR.

Demand is projected to reach approximately 57 TWh by 2030.

The challenge extends beyond overall electricity generation capacity. Reliable grid connectivity, adequate substation capacity and sufficient redundancy at individual data centre locations are becoming increasingly important as operators commit to larger campuses and more power-intensive infrastructure.

Hyperscale operators are also increasingly considering on-site or behind-the-meter power generation to secure reliable electricity supplies. This, in turn, changes the risk profile of individual facilities and makes location-specific power resilience assessments increasingly important.

Energy is estimated to account for approximately 65% of data centre operating costs, making power reliability both an operational and commercial priority.

The concentration of capacity further increases the significance of regional power resilience. Maharashtra, Telangana and Karnataka together account for approximately 70% of India’s data centre capacity, according to the research.

Bigger Data Centres Increase Construction Risk

India’s data centre construction pipeline is also expanding rapidly.

The country added approximately 7 million sq ft of data centre space in 2025, while construction volumes have grown at a 37% CAGR since 2016, based on S&P data cited in the report.

At the same time, the average size of a new data centre has increased substantially — from around 59,000 sq ft in 2016 to 276,000 sq ft in 2025.

Larger facilities mean greater concentrations of physical assets and business activity at individual locations.

The risk becomes particularly significant when new construction takes place alongside an operational data centre. Howden estimates that expansion planned at existing data centres between 2026 and 2030 is equivalent to approximately 78% of their current footprint.

Construction work at live facilities can expose sensitive operations to physical damage and business interruption risks, particularly during testing and commissioning.

As a result, Howden argues that construction and operational risks need to be assessed as part of a single risk-management programme.

Redundancy Does Not Eliminate Outage Risk

Indian data centres have invested significantly in backup infrastructure.

More than 90% of India’s data centres have redundancy in UPS, generator and cooling systems, according to Howden.

However, redundancy does not eliminate the possibility of outages.

Some failures can occur without causing physical damage to insured assets. Such non-damage outages may therefore fall outside conventional property insurance structures.

The issue is particularly relevant for retail and wholesale data centre operators, which account for approximately 86% of India’s data centres and often have contractual uptime commitments to multiple customers.

The insurance market is consequently developing alternative solutions, including parametric insurance, which can potentially respond to defined operational disruptions rather than relying solely on physical damage as the trigger.

Cyber Risk Extends Across Multiple Tenants

The interconnected nature of data centres also creates a significant concentration of cyber risk.

A single cyber compromise at a major facility could potentially affect systems and workloads belonging to a large number of tenant organisations.

Interconnected tenants can also increase the possibility of lateral movement across systems, making cyber exposure an issue that extends beyond an individual operator’s own infrastructure.

Howden therefore highlights the importance of considering cyber risk alongside physical infrastructure, power resilience and operational risks.

For insurers and operators, the increasing concentration of customers and digital workloads within large facilities means that a single incident can potentially have consequences across multiple businesses.

Water Stress Becomes a Site-Selection Issue

Power is not the only resource-related challenge facing India’s data centre expansion.

Water availability is becoming an increasingly important consideration because many facilities are located in urban areas where water resources are already under pressure.

According to Howden, cooling a 1 MW data centre can require approximately 25.5 million litres of water annually.

This makes water availability and consumption important considerations during the site-selection and design stages.

The research recommends that operators consider factors such as renewable power sourcing, energy efficiency, power usage effectiveness (PUE), water availability and consumption, and carbon footprint at an early stage rather than addressing them after construction.

Insurance Frameworks Face New Challenges

The rapid evolution of India’s data centre sector is also exposing gaps in traditional insurance structures.

Howden identifies several areas requiring greater attention, including non-damage outages, water-related exposure and the interaction between construction, power, cyber and operational risks.

Traditional insurance programmes can sometimes treat these risks independently, while the actual operation of a data centre means that they can be closely interconnected.

For example, a power disruption may not physically damage equipment but can nevertheless interrupt services to multiple customers. Similarly, construction activity at an operating facility can create risks that cross the boundaries between construction insurance and operational property cover.

Integrated Risk Planning Becomes Critical

Amit Agarwal, CEO, Howden India, said India’s data centre growth is not only about adding capacity, with power reliability, construction at operating sites, cyber concentration and water stress potentially affecting uptime.

He said these risks need to be identified early and managed together, with insurance designed around the exposures that remain.

The research consequently points towards a more integrated approach to data centre risk management.

For developers and operators, this means risk assessment increasingly needs to begin before a site is acquired or construction starts. Power availability, water resources, connectivity, environmental conditions and the surrounding infrastructure can all influence the long-term resilience of a facility.

Data Centre Growth Has Real Estate Implications

India’s data centre expansion is also becoming an increasingly important consideration for the country’s commercial and infrastructure real estate markets.

Large data centre campuses require significant amounts of land, reliable power infrastructure, connectivity and supporting utilities. As facilities become larger, the availability and resilience of these supporting systems could influence where future campuses are developed.

The concentration of approximately 70% of India’s data centre capacity across Maharashtra, Telangana and Karnataka also highlights the importance of infrastructure planning in the country’s leading digital hubs.

As demand grows towards the projected 57 TWh of power consumption by 2030, the development of data centres is likely to remain closely linked with investments in electricity infrastructure, water management, connectivity and surrounding urban ecosystems.

For India’s digital infrastructure sector, therefore, the next phase of growth will involve not only building more capacity, but ensuring that the physical and financial systems supporting these facilities are resilient enough to keep them operational.

Also Read: Data center stock to double in next 3 years to 20 million sq ft

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