Data centres: Powering India’s AI boom

The rapid expansion of AI has led to a completely new string of demand for data centres, so much so that they are now being also referred as ‘AI Factories’. The Government’s thrust through the IndiaAI mission along with the growing AI-readiness of Indian enterprises, means the country needs a robust domestic GPU infrastructure, evident from the numbers of new entrants to supply the required capacity.

There is now a growing need for capital solutions to fund the deployment of GPU clusters. The unit economics and return profiles look compelling, enabling value creation opportunity for the market participants.

India is also home to some large strategic partnerships aiming to build GW-scale AI-dedicated data centre campuses. The participation by conglomerates of the likes of Reliance Jio, Adani, Bharti Airtel, and Tata is a strong testament of what lies ahead for India in terms of AI revolution.
 

Mumbai continues to lead market share and being the prime destination for existing and upcoming capacity with ~50% share on both fronts. Hyderabad is slowly developing into a major data centre destination especially for hyperscale self-build campuses.

Rising demand, driven in part by cloud and AI workloads, led annual absorption to cross 300 MW in CY2025 and is expected to average 650–700 MW annually over the next five years. 
 

The Indian data centre market which can be categorised into four developer segments, is broadening as capacities by some of the new entrants become operational. The pipeline also remains strong, and we expect a regular, steady flow of supply from these players as they have capacities at varied stages of construction. At the same time, niche domestic participants are expected to continue adding higher capacities every year. 

The investment activity is on the rise with a flurry of recent transactions in the AI cloud and AI-data centre development segments. The Indian data centre industry has witnessed over USD 5 bn of transaction activity over the last 3 years. At the global level, we are seeing a new benchmark every year for the largest transaction, with the latest exceeding USD 40 bn in total enterprise value.

Players are also seen exploring different routes to monetize invested capital, including IPOs and private transactions. Existing REITs and InvITs are also actively scouting assets for acquisition. However, pure-play Data Centre REITs might take some more time, as the market achieves larger scale.