Data centres: A USD 25 billion market opportunity over the next decade

India’s data centre industry is rapidly evolving as hyperscale infrastructure matures into a core real estate asset class, attracting significant interest from RE funds and developers. While rental pressures from hyperscalers are pushing operators to build more return-accretive enterprise-focused solutions, several hyperscalers are also shifting toward self-build and owned models to secure long-term capacity. At the same time, the rise of generative AI is forcing a re-evaluation of existing infrastructure, creating a powerful new demand stream alongside cloud. In parallel, edge data centres are emerging as a long-term growth driver, critical for improving digital inclusion, user experience, and India’s global digital competitiveness.

India’s data centre capacity continues to be concentrated in established markets, with around 1,011 MW of installed capacity today, nearly 94% of which is located across just seven cities. Mumbai and Chennai lead the landscape, benefiting from their dense subsea cable ecosystems that offer superior global connectivity and latency advantages. Among them, Mumbai remains the dominant hub for both existing and upcoming capacity, while newer locations are expected to scale up more gradually over time as demand broadens geographically.

The Indian data centre market can broadly be classified into four segments: established players with large-scale online capacities and a strong operating track record; dedicated data centre platforms backed by financial investors; global players strategically entering India through different ventures; and domestic Indian players that continue to serve and defend their share of the market through localized execution and long-standing customer relationships.

The asset develop-and-sell model in the Indian data centre space can deliver attractive 25%+ IRRs, offering superior development returns compared to other yielding real estate asset classes. The sector presents a compelling real estate play with differentiated return and yield profiles, while also offering opportunities across the entire ecosystem - from hyperscale developers and enterprise colocation players with real estate-like characteristics to cloud service providers and managed service players with IT-like characteristics. Reflecting this evolution, transactions in the sector have shifted from being largely primary investments during FY18–24 to a mix of primary and secondary deals in FY24–28, with the longer-term trajectory expected to move towards data centre REITs beyond FY28.

Globally, the data centre industry has seen the emergence of several large players across key geographies, reflecting the sector’s unique blend of stable annuity-like returns and high-growth opportunities. This combination has attracted a wide spectrum of investors, leading to multiple US$200+ million capital raises and several multi-billion-dollar M&A transactions worldwide. Valuation benchmarks also remain strong, with global data centre REITs trading at cap rates of ~5% and data centre platforms commanding EV/EBITDA multiples of ~16x, underscoring sustained investor confidence in the asset class.