India’s data centre sector has moved past a turning point in 2026. New capacity is coming online, capital markets are moving fast and policy at both the central and state levels is finally catching up with the scale of money flowing in. For an industry that spent most of the decade being called nascent, this change matters. The real story of the year is the shift from what India’s data centre market could become to what it is becoming.
CBRE’s India Alternate Sectors Outlook 2026 pegs India’s total data centre capacity past 1,700 MW at the close of 2025, on the back of a record 440 MW added that year, a 160 per cent jump over that in the year before. CBRE expects another 30 per cent growth in 2026, adding close to 500 MW of fresh supply. The investment numbers tell an even sharper story. Cumulative data centre investment now stands at $126 billion, up $56.4 billion in 2025 alone, and CBRE expects that figure to grow about 45 per cent year on year to cross $180 billion by the end of 2026. In an industry where the announced investment and the actual operational capacity have historically been far apart, this kind of steady, compounding growth points to a real change in direction.
Sovereign wealth funds, private equity firms and infrastructure funds increasingly see data centre platforms as long-duration, inflation-protected assets with steady, predictable returns, much the way they have traditionally viewed toll roads and airports.
Capital markets take notice
The clearest sign of this shift is playing out in the capital markets. Sify Infinit Spaces got regulatory clearance in January 2026 for what would be India’s first pure-play data centre initial public offering (IPO), sized at roughly Rs 37 billion, split between a Rs 25 billion fresh issue and a Rs 12 billion offer for sale. The company runs 14 co-location data centres across six cities, with combined built IT power capacity of over 188 MW as of mid-2025 and more than 500 hyperscale and enterprise clients.
Yotta Data Services is on a similar track, looking to raise up to $1.2 billion from investors ahead of a listing that could happen as early as this year. STT’s Indian arm has also been preparing for a public listing after buying out its Singapore parent earlier in the year. Airtel’s Nxtra Data has filed its own draft red herring prospectus. Nashik-based ESDS Software Solution, a cloud computing and managed data centre services provider, filed a fresh Rs 6 billion DRHP in March 2026, its second attempt at going public after an earlier bid in 2021 did not go through.
Put together, several data centre-linked listings are moving through the pipeline at the same time, a pace that would have seemed unlikely just two years ago, when a dedicated data centre IPO in India was still just an idea. This mirrors a broader global pattern of data centre platforms turning to public markets, but the speed at which India’s pipeline has come together stands out. Ownership is shifting quickly too, with joint ventures and acquisitions changing who controls capacity even as new capacity comes online. Global hyperscalers have added their own direct commitments on top of this. Combined investment announcements from just two of the largest cloud providers in Indian data centre and cloud infrastructure now cross $32 billion, which helps explain why domestic operators are racing to raise capital and build capacity at the same time.
Budget that changed the conversation
If there is one moment that marks 2026 as a turning point, it is Union Budget 2026-27. It encompassed a tax holiday running all the way to 2047 for eligible foreign cloud service providers using India-based data centre infrastructure to serve customers overseas. A horizon that long reads less like a tax break and more like a statement of intent. The budget also brought in a 15 per cent safe-harbour regime for related-party transfer pricing. CBRE’s coverage of the budget notes that this kind of tax certainty could meaningfully lower the capital cost for data centre projects and improve returns across the industry. For a sector where a single hyperscale campus can cost over a billion dollars, that is often the difference between a project getting the go-ahead and getting shelved.
What stands out is how deliberately the central government has tied policy together – tax, power and land – around one idea, that is, data centres are now core national infrastructure, not just another category of real estate. The Draft National Data Centre Policy reflects the same thinking, proposing infrastructure-status-equivalent benefits such as up to 20 years of conditional tax exemptions, full electricity duty waivers, input tax credits on capital equipment and dedicated data centre economic zones near IT corridors, with land pre-allocated and clearances fast-tracked through a single window. Data centres already carry formal infrastructure status under the Harmonised Master List of Infrastructure subsectors, which has made it noticeably easier to access long-tenor, lower-cost project financing.
States compete for investment
The sharpest competition in 2026 has played out at the state level, where policy incentives have become a key factor in attracting investment. CBRE’s state-level analysis names Uttar Pradesh, Gujarat, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Maharashtra and Odisha as the most active states, each running its own mix of land allotment, power tariff concessions, stamp duty waivers and single-window clearance systems, aimed at hyperscale-format investment. Several of these states have started favouring larger-format projects outright, a sign that they are chasing hyperscale-level investment rather than smaller, standalone facilities.
The result is growing competition among states, and it is reshaping the country’s data centre map. CBRE’s data shows Telangana, Maharashtra, Tamil Nadu, Andhra Pradesh and Uttar Pradesh currently leading the country in headline investment commitments, but the more interesting story is what is happening outside these established hubs. CBRE points to Ahmedabad, Visakhapatnam, Patna and Bhopal as Tier 2 markets now drawing genuine developer interest, not as fallback options but as real contenders, as land in Mumbai, Chennai and the National Capital Region grows scarcer and more expensive. States, which had no real data centre pipeline three years ago, are now writing incentive policies almost as fast as the projects themselves are being built.
The binding constraints
For all the enthusiasm, the industry keeps running into one constraint – power. This is not about India’s ability to generate power, since installed generation capacity on paper is not short. It is about the ability to deliver clean, uninterrupted, high-density electricity to a single site, on demand, at scale. CBRE has flagged access to power and suitable land as the binding constraints across nearly every major market, ahead of capital availability. Land availability makes the problem worse, since power-ready parcels near substations and transmission corridors are limited and increasingly contested. Land banking has become more competitive, with developers securing plots years before construction begins just to stay ahead of demand.
This is pushing the conversation into some unexpected territory. Industry experts have started discussing small modular reactors (SMRs), compact nuclear units that can deliver round-the-clock baseload power in a way renewables, with their built-in intermittency, cannot. It is telling that the same conversations are happening around India’s defence manufacturing push, where facilities face an identical power problem. Nobody expects an SMR to power a data centre in India this decade, since cost, regulatory readiness, fuel supply chains and public perception are all real hurdles. But the fact that it is being discussed seriously shows how acute the power question has become. In the meantime, battery storage capacity is being built out to ease out solar and wind intermittency.
Water is turning into the sector’s next big constraint. As liquid cooling and denser rack configurations become more common, operators are increasingly expected to adopt closed-loop, more water-efficient cooling systems, both to control costs and to meet tightening water usage disclosure rules in states where municipal supply is already stretched thin.
What lies ahead?
India’s data centre capacity, just under 2 GW today, is widely expected to more than triple by the turn of the decade. The capital is there. The policy framework, at both the national and state levels, has come together in a way it had not two or three years ago. Hyperscalers have committed capital at scale, IPO pipelines are active and states that had little to offer a few years ago are now competing on power tariffs and land parcels. What will decide how fast this potential turns into operational capacity is not investor appetite, which remains strong, but the more basic task of getting substations, transmission lines, land titles and cable landings to keep pace with the ambition. If 2025 was the year that showed India’s data centre sector could build capacity and scale, 2026 is the year that scale started turning into capacity on the ground.
