India's data centre sector crossed a landmark threshold in 2025, with cumulative colocation leasing reaching 2.06 GW, according to an analysis by Knight Frank India released on Tuesday, 2 June 2025. Artificial intelligence-led demand is now the sector's defining growth engine, with nearly 20 per cent of total leasing directly attributable to AI-related workloads.

AI Demand More Than Doubles in a Single Year

AI-related colocation leasing alone hit 348 MW in 2025, more than doubling year-on-year, according to the Knight Frank India report. The acceleration reflects surging enterprise adoption of generative AI, machine learning applications, and GPU-intensive computing — all of which demand far denser, more power-hungry infrastructure than conventional enterprise IT.

This is not incremental growth; it represents a structural shift in what data centres are being built for. Hyperscale cloud providers and large enterprises are absorbing capacity as fast as it comes online, keeping vacancy levels tight across key markets despite rapid supply additions.

A Decade of Structural Expansion

India's live data centre capacity has grown from approximately 296 MW in 2016 to over 1.6 GW in 2025, a compound annual growth rate of nearly 30 per cent over the period, according to the report. The sector has evolved from a fragmented infrastructure base into a recognised institutional asset class, drawing sustained capital inflows and building a rapidly expanding development pipeline.

Committed and early-stage development pipelines have now crossed 8 GW across major Indian markets, signalling strong long-term supply visibility. The growth has been underpinned by hyperscale cloud expansion, enterprise digitisation drives, regulatory data localisation mandates, and rising demand for low-latency digital infrastructure.

City-by-City Breakdown

Mumbai retains its dominant position, accounting for nearly 47 per cent of India's total live capacity. Its advantages — dense fibre connectivity, submarine cable landing stations, and its status as the country's financial hub — continue to attract the largest share of investment.

Chennai has reinforced its role as a critical gateway for Southeast Asia data traffic, while Hyderabad is emerging as a dedicated AI and hyperscale infrastructure hub, backed by state policy incentives and growing cloud commitments.

Bengaluru, Pune, and the Delhi-NCR region are evolving as specialised enterprise markets, driven by Global Capability Centre (GCC) expansion and BFSI workloads. Tier-II cities are increasingly drawing new investment announcements, broadening the sector's geographic footprint beyond traditional metros.

What the Tightening Vacancy Signals

Despite the rapid pace of capacity additions, vacancy levels across key markets remain constrained — a clear indicator that demand absorption is outpacing supply. Hyperscalers and large enterprise occupiers are the primary drivers of this absorption, and with the AI pipeline still in early innings, the pressure on available capacity is unlikely to ease in the near term.

With the 8 GW development pipeline now committed and AI workloads still scaling, India's data centre sector appears set for another phase of accelerated investment through the remainder of the decade.