Artificial intelligence (AI) is becoming a significant factor in India’s data center industry, with colocation leasing expected to reach 2.06 GW by 2025, according to a report by Knight Frank India. Around 20% of the total leasing demand is now directly linked to AI-related workloads, including generative AI, machine learning applications, and GPU-intensive computing, reshaping infrastructure needs across various sectors.
In 2025, AI-related colocation leasing alone surged to 348 MW, more than doubling from the previous year, reflecting a rapid increase in demand driven by the global AI trend and greater enterprise adoption of high-performance computing. India’s data center market is experiencing substantial growth, fueled by hyperscale cloud expansion, enterprise digitalization, regulatory-driven data localization, and a rising need for low-latency digital infrastructure.
Over the past decade, the sector has transformed from a fragmented infrastructure base into a strategic institutional asset class, attracting significant capital inflows and witnessing a rapidly expanding development pipeline. Despite continuous capacity additions, key markets in India are facing tight vacancy levels, indicating sustained strong demand from hyperscalers and large enterprise tenants.
India’s live data center capacity has grown significantly, surpassing 1.6 GW in 2025 from around 296 MW in 2016, with a compound annual growth rate of nearly 30%. The report also noted that the combined committed and early-stage development pipelines have exceeded 8 GW across major markets, signaling robust long-term supply growth prospects.
Mumbai leads the way in India’s data center capacity, accounting for almost half of the total live capacity, supported by robust fiber connectivity, submarine cable landing stations, and its status as the financial hub of the country. Chennai has solidified its position as a crucial gateway for data traffic to Southeast Asia, while Hyderabad is emerging as a significant AI and hyperscale infrastructure center, backed by state incentives and increasing cloud investments.
Cities like Bengaluru, Pune, and the Delhi-NCR region are evolving as specialized markets driven by enterprise demand, growth in the government, construction, and communication (GCC) sector, and workloads from the banking, financial services, and insurance (BFSI) industry. Additionally, Tier-II cities are increasingly attracting new investments, showcasing the sector’s expanding footprint across India.
