India's REITs Pivot to Data Centres as AI Demand Surges
Indian real estate funds are shifting focus from offices to data centres, driven by a fourfold increase in national computing capacity.
Key points
- India's data-centre capacity grew from 375 MW in 2020 to 1,575 MW by 2026, driven by cloud and AI demand.
- Projected capacity is expected to reach 6 GW by 2029, with annual revenue growth of 20-22% for third-party operators.
- REITs like Mindspace are shifting portfolios to include data centres, which require higher upfront capital than offices.
India’s listed real estate investment trusts, traditionally anchored by office towers, are increasingly allocating capital to data centres. This shift reflects a structural change in the market, where the infrastructure supporting digital workloads is becoming a primary driver of rental income.
According to reports from the Hindustan Times, this transition is not merely a trend but a response to exploding demand. National data-centre capacity has quadrupled since 2020, reaching approximately 1,575 megawatts by 2026, creating a new asset class for conservative investors.
Demand outpaces historical office growth
Commercial demand for these facilities is accelerating rapidly. Estimates suggest India’s total capacity will reach 6 gigawatts by 2029, up from 1.6 gigawatts in mid-2026. In the first half of 2026 alone, new absorption reached 101 megawatts, a figure more than 20% higher than the three-year average.
This growth is fueled by hyperscale operators and the rise of artificial intelligence. The requirement for high-density computing power, extensive cooling, and reliable energy supply has made these facilities critical, distinct from standard commercial real estate where location and square footage are the primary value drivers.
AI workloads drive infrastructure needs
Artificial intelligence has introduced a new layer of complexity to the market. Training and running large models require specialized hardware, such as graphics processing units, which consume significant power and generate substantial heat. India’s public AI mission had already crossed 45,000 GPUs by June 2026, indicating the scale of this technological shift.
Analysts project that third-party data-centre revenue will grow by 20-22% annually, reaching around 200,000 crore rupees by fiscal 2028. This growth is underpinned by cloud adoption and the spread of 5G applications, which require low-latency infrastructure to function effectively.
Investors face higher capital risks
While the growth outlook is strong, the economics for real estate investors remain different. Data centres require substantial upfront capital and their performance is tightly coupled to technology infrastructure rather than just physical space. Occupancy rates and customer concentration are now critical metrics that differ from traditional office portfolios.
Existing funds are already adapting. Mindspace Business Parks REIT, for example, has completed two data-centre buildings in Navi Mumbai and is developing additional facilities. This move signals a broader industry acceptance that digital infrastructure is now a core component of real estate value.
