India’s data centre industry is entering a new phase of expansion as Artificial Intelligence (AI) adoption, cloud demand, and digital infrastructure investments accelerate across the country, according to separate reports by Knight Frank India and KPMG.
Knight Frank said India’s live data centre capacity has crossed 1.6GW as of what time? and is backed by an investment pipeline exceeding $100 billion. KPMG, meanwhile, said the industry’s biggest challenge is no longer demand generation but the ability to build, deploy, and operate increasingly complex infrastructure at scale.
Together, the reports point to a sector moving beyond capacity expansion towards a broader transformation driven by AI workloads, data localisation requirements, and hyperscale investments.
The reports also suggest that future growth will depend not only on adding new capacity but also on building infrastructure that can support increasingly demanding computing requirements. From power systems and cooling technologies to construction execution and operational management, data centre operators are being pushed to rethink how facilities are designed and deployed.
Knight Frank sees artificial intelligence and hyperscalers driving the next phase of growth
Knight Frank said India’s live data centre capacity reached 1,608.8MW in 2025, up sharply from 296MW in 2016. Cumulative colocation leasing crossed 2.06GW during the year, reflecting sustained demand from hyperscalers, cloud providers, and enterprises.
AI is emerging as a major contributor to that growth. Knight Frank said AI-related colocation leasing reached 348MW in 2025, more than doubling from the previous year. Cumulative AI-linked leasing capacity stood at 492.2MW by the end of 2025.
Commenting on the sector’s transformation, Shishir Baijal, International Partner, Chairman and Managing Director at Knight Frank India, said, “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. AI-led workloads, hyperscaler investments, sovereign data requirements and cloud adoption are collectively accelerating demand for high-density digital infrastructure across India.”
Knight Frank said India added 371.5MW of live capacity in 2025 following the addition of 361.6MW in 2024. The report said the development pipeline remains substantial across major markets.
KPMG says execution capability becoming defining challenge
While demand continues to strengthen, KPMG said the industry’s primary challenge has shifted towards execution.
In its report on India’s data centre lifecycle model, KPMG said operators are increasingly dealing with complex infrastructure requirements that extend far beyond conventional construction projects. The firm said successful deployment now requires coordination across planning, engineering, procurement, technology integration, compliance and long-term operations.
KPMG said, “Right now, the biggest roadblock to scaling up is not a lack of demand. It is the sheer complexity of meeting the demand.”
According to the report, traditional fragmented delivery models are becoming less effective as facilities grow larger and more technologically sophisticated. Data centre developers are increasingly looking for integrated approaches that can reduce delays, improve operational efficiency and accelerate deployment timelines.
KPMG said execution quality will become increasingly important as AI workloads demand more specialised infrastructure and tighter performance standards.
Why both firms identify AI as the sector’s biggest growth driver?
Although the reports approach the industry from different perspectives, both identify AI as a major catalyst for future growth.
Knight Frank said AI-related leasing activity has emerged as one of the fastest-growing segments within India’s data centre market. The report noted that generative AI applications, machine learning workloads, and graphics processing unit-intensive computing are creating demand for new infrastructure.
KPMG also highlighted the changing nature of computing requirements. The firm said facilities designed around traditional air-cooling systems are often not suited to support modern AI environments, which require greater computing density and more advanced cooling technologies.
According to KPMG, AI is forcing operators to rethink infrastructure design, energy consumption patterns and facility management practices.
The reports suggest that future investment decisions will increasingly be influenced by a facility’s ability to support AI workloads rather than conventional storage and processing requirements alone.
Mumbai remains dominant, while Hyderabad and Chennai gain ground
Knight Frank said Mumbai continues to dominate India’s data centre ecosystem.
The city accounted for nearly 47% of the country’s total live capacity in 2025, with live IT load reaching 766.6MW. Knight Frank attributed Mumbai’s leadership position to its connectivity advantages, concentration of financial institutions and extensive international cable infrastructure.
The report said Mumbai’s committed pipeline stood at 1,543.3MW, while the early-stage development pipeline exceeded 2,209MW.
At the same time, growth is becoming increasingly diversified.
Chennai’s live capacity increased to 191.5MW in 2025 from 73.2MW in 2022. Hyderabad’s live capacity rose to 151.4MW from 60.9MW over the same period.
Discussing the growing role of regional markets, Viral Desai, International Partner and Senior Executive Director at Knight Frank India, said, “India’s data centre growth story is increasingly becoming a tale of regional specialisation. While Mumbai continues to anchor hyperscale deployments owing to its connectivity advantages, Hyderabad is emerging as a preferred AI infrastructure destination, and Chennai is strengthening its role as a strategic gateway for international data traffic from the east.”
Knight Frank said both cities are attracting significant investments from global cloud providers and large-scale operators.
KPMG says integrated infrastructure models will become increasingly important
KPMG said the next stage of industry growth will require closer integration across the entire data centre lifecycle.
The firm said operators are increasingly moving away from siloed approaches towards models that combine design, construction, technology deployment, and operations. This is becoming necessary because of the rising complexity of modern facilities.
The report said data centres can no longer be viewed purely as real estate assets. Instead, they function as technology-intensive infrastructure platforms where operational efficiency is as important as physical construction.
KPMG said organisations that successfully integrate planning, execution and operations are likely to be better positioned to manage costs, improve uptime and accommodate future technology upgrades.
The report also noted that artificial intelligence deployments are accelerating the need for this integrated approach because of their specialised infrastructure requirements.
Power infrastructure and sustainability remain key concerns
Despite strong demand and significant investment commitments, both reports pointed to operational challenges that could influence future growth.
Knight Frank identified power availability as one of the sector’s most important constraints. The report said transmission infrastructure additions continue to lag targets, creating potential challenges for large-scale developments.
The report noted that only 8,830 circuit kilometres of transmission lines were commissioned in FY25 against a target of 15,253 circuit kilometres. By December FY26, 6,961 circuit kilometres had been added against a full-year target of 15,382 circuit kilometres.
Knight Frank also highlighted permitting timelines, water management requirements and sustainability considerations as important factors affecting project execution.
KPMG echoed many of those concerns. The firm said operators are increasingly focused on energy efficiency, renewable energy sourcing and environmental performance as facilities become larger and more power intensive.
According to KPMG, balancing growth ambitions with sustainability requirements will remain a key priority for the industry.
New markets are emerging beyond traditional hubs
Knight Frank said the industry’s geographic footprint is also beginning to widen.
The report highlighted Visakhapatnam and Jamnagar as emerging destinations for large-scale projects. According to Knight Frank, these developments reflect a broader trend towards geographic diversification as operators seek access to land, power resources and infrastructure corridors.
Knight Frank said AdaniConneX and Google have announced plans for a gigawatt-scale AI data centre campus in Visakhapatnam. The report also noted Reliance Industries’ proposed 3GW AI-focused data centre campus in Jamnagar.
These projects indicate that future growth may increasingly extend beyond established metropolitan markets.
Conclusion
The latest reports from Knight Frank and KPMG paint a picture of an industry moving into a new phase of development. Knight Frank sees strong momentum in capacity additions, AIadoption and investment activity. KPMG points to the growing importance of execution capability, integrated infrastructure models and operational efficiency.
Together, the reports suggest that India’s data centre sector is no longer being defined solely by how much capacity is added. The focus is increasingly shifting towards how efficiently that capacity can be built, powered, and operated. As artificial intelligence adoption accelerates and cloud demand continues to rise, both reports indicate that the industry’s next chapter will be shaped as much by infrastructure execution as by infrastructure investment.