India's data centre industry has entered a new growth phase, with live IT capacity across the country's seven major markets surpassing 1.6 GW by the end of 2025, up more than fivefold from around 296 MW in 2016, according to Knight Frank India's latest India Data Centre Market Update 2025 report.

The sector added 371.5 MW of live capacity in 2025, following an addition of 361.6 MW in 2024, reflecting momentum driven by artificial intelligence (AI), cloud adoption, enterprise digitisation and data localisation mandates. Knight Frank estimates that committed and early-stage development pipelines now exceed 8 GW across key markets, supported by announced investment plans exceeding $100 billion.

AI emerges as the biggest growth catalyst

AI-led workloads are rapidly reshaping India's digital infrastructure landscape. Cumulative colocation leasing reached 2.06 GW in 2025, with nearly 20% of total demand linked directly to AI-related workloads. AI-focused leasing alone climbed to 348 MW during the year, more than double the level recorded in 2024.

The report noted that cumulative AI-related leasing capacity reached 492.2 MW by 2025 as hyperscalers, technology firms and enterprises expanded investments in generative AI and GPU-intensive computing infrastructure.

"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," said Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India. Baijal said AI-led workloads, hyperscaler investments, sovereign data requirements and cloud adoption are collectively accelerating demand for high-density digital infrastructure across the country.

Mumbai leads, Hyderabad and Chennai gain ground

Mumbai retained its position as India's largest data centre hub, accounting for nearly 47% of the country's live capacity. The city's live IT load reached 766.6 MW in 2025 and is projected to approach 866 MW by 2027. Its committed development pipeline expanded to 1,543 MW by the end of 2025, supported by robust demand from hyperscalers and AI-focused occupiers.

Chennai emerged as the second-largest market with 191.5 MW of live capacity, while Hyderabad more than doubled its capacity from 60.9 MW in 2022 to 151.4 MW in 2025, positioning itself as a key destination for AI infrastructure investments. NCR's live capacity rose to 174.5 MW during the period, supported by demand from the BFSI sector and public cloud providers.

Tier-II cities enter the hyperscale race

The report highlighted the growing decentralisation of India's data centre ecosystem, with Tier-II cities emerging as the next growth frontier. Visakhapatnam has attracted one of the country's largest proposed digital infrastructure investments, with AdaniConneX and Google planning a $15 billion gigawatt-scale AI data centre campus. Jamnagar has also emerged as a significant AI infrastructure destination following Reliance Industries' proposed 3 GW AI-focused data centre project.

"India's data centre growth story is increasingly becoming a tale of regional specialisation," said Viral Desai, International Partner and Senior Executive Director, Knight Frank India. He noted that while Mumbai continues to anchor hyperscale deployments, Hyderabad is emerging as a preferred AI infrastructure destination and Visakhapatnam is rapidly becoming one of India's most active greenfield data centre markets.

The report cautioned that power availability, transmission infrastructure gaps, permitting delays and water sustainability challenges remain key hurdles. However, the convergence of AI-led digital transformation, hyperscale cloud expansion and supportive policy measures is expected to position India among the world's most important data centre and AI infrastructure markets over the coming decade.