India’s data centre sector has entered a new phase of growth, transforming from a niche infrastructure segment into one of the most strategic pillars of the country’s digital economy. According to Knight Frank India’s latest India Data Centre Market Update 2025, live IT capacity across the country’s seven major markets has crossed 1.6 GW by the end of 2025, marking a dramatic rise from just 296 MW in 2016.
The sector’s expansion is being fuelled by a convergence of artificial intelligence (AI), cloud adoption, enterprise digitisation and stricter data localisation requirements. India added 371.5 MW of live capacity in 2025, following a significant 361.6 MW addition in 2024, underscoring the shift from sporadic growth to a sustained infrastructure development cycle.
What makes this growth story particularly significant is the scale of future investment. Knight Frank estimates that committed and early-stage development pipelines now exceed 8 GW across major markets. At the same time, vacancy levels remain tight despite the rapid supply addition, highlighting strong demand from hyperscale cloud operators and AI-driven occupiers.
AI has emerged as the defining force behind the next wave of expansion. Cumulative colocation leasing reached 2.06 GW in 2025, with nearly one-fifth of demand directly linked to AI workloads. AI-related colocation leasing alone touched 348 MW during the year, more than doubling compared to 2024. By 2025, cumulative AI-related leasing demand had reached 492.2 MW, reflecting the growing infrastructure requirements of generative AI, machine learning and GPU-intensive computing.
Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India said “The Indian data centre sector is no longer merely expanding — it is structurally transforming into one of the foundational pillars of the country’s digital economy. AI-led workloads, hyperscaler investments, sovereign data requirements and cloud adoption are collectively accelerating demand for high-density digital infrastructure across India. What distinguishes the current cycle is the sheer depth of the development pipeline and the strategic diversification into emerging corridors beyond traditional hubs”.
Mumbai continues to dominate India’s data centre landscape, accounting for nearly 47% of the country’s total live capacity. The city’s live IT load reached 766.6 MW by the end of 2025 and is expected to approach 866 MW by 2027. Its position as India’s financial capital, coupled with extensive fibre connectivity and international subsea cable landings, continues to attract hyperscale operators. Navi Mumbai and Chandivali have emerged as key development corridors, while Mumbai’s committed and early-stage pipeline now exceeds 3.7 GW.
Beyond Mumbai, India’s data centre map is becoming increasingly diversified.
Chennai has strengthened its position as the country’s second-largest market, with live capacity rising from 73.2 MW in 2022 to 191.5 MW in 2025. The city’s competitive power costs, supportive policy environment and strategic role as a gateway for Southeast Asian internet traffic have attracted major investments from global operators.
Hyderabad, meanwhile, is rapidly emerging as India’s AI infrastructure capital. Live capacity in the city has more than doubled since 2022 to reach 151.4 MW, while its combined committed and early-stage pipeline has approached 1.9 GW. Telangana’s policy focus on AI, lower operating costs and resilient geography have strengthened Hyderabad’s appeal among hyperscale cloud providers. Microsoft is expected to launch its India South Central data centre region in the city in 2026, while AWS and Oracle are also expanding their presence.
Other markets are carving out specialised roles. Bengaluru continues to benefit from demand generated by Global Capability Centres (GCCs), research and development facilities and enterprise colocation requirements. Pune has emerged as a cost-efficient alternative to Mumbai, while the National Capital Region has seen strong growth driven by banking, financial services and public cloud demand.
A notable trend emerging from the report is the rise of Tier-II cities as the next frontier of data centre expansion. Visakhapatnam has attracted one of the country’s largest digital infrastructure commitments, with AdaniConneX and Google announcing plans for a gigawatt-scale AI data centre campus backed by investments of nearly USD 15 billion over five years. The project also includes a new international subsea cable gateway, potentially transforming India’s eastern coastline into a major digital corridor.
Jamnagar has also entered the spotlight following Reliance Industries’ proposal to develop a 3 GW AI-focused data centre campus, which could eventually become one of the largest such facilities globally. These developments signal a broader shift toward geographic diversification as operators seek locations with greater land availability, power access and long-term scalability.
Regulatory developments are further reinforcing demand. The implementation of India’s Digital Personal Data Protection (DPDP) Rules in November 2025 has introduced stricter requirements around data storage, security and cross-border transfers. Industry observers expect the framework to accelerate the localisation of critical workloads across sectors including banking, telecom, healthcare, e-commerce and government services.
At the same time, India’s sovereign AI ambitions are creating new demand for computing infrastructure. The central government’s deployment of 38,000 GPUs, along with another 20,000 in the pipeline, is expected to support startups, enterprises and research institutions while driving demand for high-density, AI-ready data centres.
Policy support has also strengthened the investment climate. The Union Budget 2026-27 extended tax holidays until 2047 for eligible foreign cloud service providers using Indian data centre infrastructure to serve global customers. Such measures have encouraged substantial capital commitments from leading technology and infrastructure players. AdaniConneX has outlined plans to develop 5 GW of capacity by 2035, backed by investments estimated at USD 100 billion. Microsoft has announced investments worth USD 17.5 billion by 2029, while Amazon Web Services has committed more than USD 12.7 billion across Maharashtra and Telangana through 2030.
Commenting on the report findings, Viral Desai, International Partner, Senior Executive Director- Occupier Strategy & Solutions, Industrial & Logistics, Capital Markets & Retail, Knight Frank India, said, “India’s data centre growth story is increasingly becoming a tale of regional specialization. While Mumbai continues to anchor hyperscale deployments owing to its connectivity advantages, Hyderabad is emerging as a preferred AI infrastructure destination, and Chennai is strengthening its role as a strategic gateway for international data traffic from east. At the same time, Vizag has rapidly emerged as one of India’s most active greenfield data centre markets, attracting gigawatt-scale development proposals backed by government support, availability of sizeable land parcels and planned subsea cable connectivity.”
Despite the optimism, challenges remain. Power availability and transmission infrastructure continue to be major constraints. India commissioned only 8,830 circuit kilometres of transmission lines in FY25 against a target of 15,253 ckm, highlighting the gap between planned and delivered infrastructure. Developers also face lengthy approval processes that can involve as many as 30 regulatory clearances, while water scarcity is prompting operators to adopt water-neutral cooling technologies and treated wastewater solutions.
Even with these hurdles, the outlook remains overwhelmingly positive. The combination of AI-led demand, hyperscale cloud expansion, data sovereignty requirements and supportive policy interventions is positioning India as one of the world’s most important digital infrastructure markets. As billions of dollars flow into new facilities and emerging locations gain prominence, the country’s data centre industry appears set for a once-in-a-generation growth cycle that could reshape the global AI and cloud infrastructure landscape over the coming decade.
