India Data Centre Market 2026: AI Demand, Hyperscale Investment and 6 GW Growth

India’s data centre industry is growing at a rapid pace. The rise of AI, cloud services and digital platforms is creating a need for more computing power and, in turn, more data centres.

According to JLL’s India Data Centre 2026 Mid-Year Report, India had 1,637 MW, or about 1.64 GW, of data centre capacity by June 2026. The market could grow to 6 GW by 2029. Reaching that level could require about US$110 billion in investment. The growth is not only about building more data centres. It is also changing the size of facilities, the amount of power they need and the way they are cooled.

India’s data centre market in 2026

At the end of the first half of 2026, India had 1,637 MW of data centre capacity across colocation and hyperscale self-build facilities. Vacancy stood at just 2.8%. At the same time, 101 MW of capacity was taken up during the first six months of the year.

There is much more capacity in the pipeline. About 4,317 MW was under construction, while the planned pipeline stood at around 15,000 MW. This shows how quickly the market is preparing for the next phase of digital growth.

AI-led demand pushes data centre absorption higher

AI is becoming one of the main drivers of data centre demand in India. In H1 2026, data centre absorption reached 101 MW. This was more than 20% higher than the three-year first-half average of 81 MW. A large part of this demand came from hyperscale projects that had already been committed. These projects made up 82% of total absorption during the period.

JLL says the rise was mainly driven by high-density computing workloads. In simple terms, AI applications need powerful computing systems that can handle large amounts of data. These systems also produce more heat and need more power and cooling.

That is changing the way new data centres are being planned. Facilities that were once built in smaller blocks are now being designed for much larger computing loads. Mumbai and Chennai remained key markets for hyperscale data centre deliveries during H1 2026.

Data centre supply is also growing fast

Demand is rising, but operators are also adding capacity quickly. JLL reports that data centre supply has grown at a 60% compound annual growth rate since 2021. Around 85 MW of new capacity was delivered during H1 2026.

Mumbai accounted for 48% of this new supply, while Chennai accounted for 50%. The size of new projects is changing as well. Data centres were traditionally developed in blocks of around 20 MW. Today, high-density workloads are pushing some projects beyond 50 MW.

Hyperscale investment spreads across India

Mumbai remains the country’s main data centre market, but investment is spreading to other cities. Global hyperscalers have committed more than US$50 billion towards AI-ready facilities. JLL expects hyperscalers to deliver around 1.4 GW through self-build projects by 2029.

Mumbai, Chennai, Hyderabad, Pune, Visakhapatnam and Delhi NCR are among the important locations in the country’s data centre market.

JLL expects India to add about 4.4 GW of new data centre capacity by 2029. Around 70% is expected to come from colocation facilities, while 30% is expected to come from hyperscale self-build projects.

Mumbai is expected to account for 35% of the new supply, followed by Hyderabad at 24%, Visakhapatnam at 14% and Chennai at 9%. The choice of location is closely linked to factors such as land, power, connectivity and government support.

India’s data centre expansion could attract US$110 billion

Building 4.4 GW of additional capacity will require a large amount of investment. JLL estimates that the expansion could involve around US$110 billion in capital spending by 2029. Of this, about US$4 billion is expected to go towards real estate construction. Another US$18 billion is linked to mechanical, electrical and plumbing systems. The largest share, around US$88 billion, is expected to be spent on IT equipment such as servers and racks.

The impact will extend beyond the data centre industry. Large facilities need a steady supply of electricity, strong transmission networks and advanced cooling systems. They also create demand for construction, equipment and other supporting services. State power utilities are already expanding transmission networks to meet the growing power needs of data centres.

Policy support is helping the data centre market

Government policy is another part of India’s data centre growth story. JLL highlights a 20-year tax holiday for foreign cloud service providers operating from Indian data centres. The benefit runs until March 31, 2047.

The report says this is designed to provide greater long-term certainty for companies making large investments in cloud and data centre infrastructure. It also links the policy environment with more than US$50 billion in long-term commitments from global technology companies. For data centre projects, this kind of policy support matters because they require large investments and take years to develop.

DPDP Act brings greater focus on data protection

India’s data centre growth is also taking place as rules around personal data become stronger. The Digital Personal Data Protection Act sets out how personal data should be collected, used and protected. It defines the individual as the Data Principal and the organisation handling the data as the Data Fiduciary.

The framework includes requirements around consent, collecting only the data that is needed, keeping information accurate and giving people rights over their personal data. It also includes requirements for reporting data breaches. Penalties for certain failures can reach ₹250 crore.

The rules are being introduced in stages. Some provisions took effect in November 2025. Consent Manager-related provisions are scheduled from November 2026, while wider compliance requirements are scheduled from May 2027. These include requirements related to security, breach reporting, children’s data and the rights of individuals. For companies handling large amounts of personal data, this makes data security an increasingly important part of digital infrastructure planning.

Green data centres: power and cooling become bigger concerns

The rapid growth of data centres also raises questions about energy use and environmental impact. Larger facilities and AI workloads require more power. They also generate more heat, making cooling an important part of data centre design.

JLL points to several ways operators are working to reduce environmental impact. These include energy-efficient equipment, monitoring energy use, renewable energy, sustainable building practices and better management of electronic waste.

Cooling technology is also changing. Newer approaches include direct-to-chip cooling, rear-door heat exchangers and immersion cooling. These technologies are being used to manage the heat produced by high-density computing while helping reduce energy use.

The source of electricity is another part of the discussion. Solar and wind power are among the renewable sources being considered for data centre operations. JLL also points to India’s plans to expand nuclear power. India’s installed nuclear capacity stood at 8.78 GW, with a target of 22.38 GW by 2031–32. The report also notes the possibility of Small Modular Reactors becoming a future power option for large data centre campuses.

What lies ahead for India’s data centres?

India’s data centre market is entering a period of rapid expansion. AI is pushing demand for high-density computing. Hyperscalers are committing large amounts of capital to self-built facilities. At the same time, colocation operators are adding capacity to meet demand from cloud providers and enterprises.

The market had about 1.64 GW of capacity by June 2026. JLL expects it to reach 6 GW by 2029. That growth will need much more than buildings and servers. India will also need reliable power, stronger transmission networks, efficient cooling, renewable energy, suitable land and skilled workers. The data centre story, therefore, is becoming a story about India’s wider digital infrastructure.

The key question for the next few years will be whether power, infrastructure and supporting systems can expand quickly enough to keep pace with the country’s growing demand for computing.

FAQs

1. How big is India’s data centre market in 2026?

India had around 1.64 GW of data centre capacity by June 2026, covering colocation and hyperscale self-build facilities.

2. Why is AI increasing demand for data centres in India?

AI needs large amounts of computing power, which increases the need for high-density data centre facilities, along with more power and advanced cooling systems.

3. How much could India’s data centre capacity grow by 2029?

JLL expects India’s data centre capacity to reach around 6 GW by 2029, up from about 1.6 GW in June 2026.

4. Which Indian cities are major data centre hubs?

Mumbai, Chennai, Hyderabad, Pune, Visakhapatnam and Delhi NCR are among the key data centre locations highlighted in the report.

5. Why are green data centres becoming important in India?

As data centres use more power and generate more heat, operators are looking at renewable energy, energy-efficient equipment and newer cooling technologies to reduce their environmental impact.

Indrani Priyadarshini

Indrani Priyadarshini is a journalist and editorial professional specialising in technology, artificial intelligence, smart cities, green energy, and digital transformation. With over four years of experience in tech journalism and digital media, she is known for turning complex industry developments into clear, engaging, and insightful stories. Her expertise spans reporting, editorial strategy, digital publishing workflows, and in-depth coverage of emerging technologies shaping the future.