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From office towers to AI infrastructure: Why India's REITs are looking at data centres
India's REIT story has largely been built around office buildings, but the infrastructure powering the digital economy is beginning to enter the conversation.
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India’s listed REIT market has been built predominantly around offices. Data centres are now starting to find a place in that portfolio mix, bringing with them a very different set of economics.
A data centre may still be a leased building, but its value depends on much more than the address and the amount of floor space available. Power supply, fibre connectivity, cooling systems and computing density all influence what the facility can support and how efficiently it can operate. The surge in cloud computing and, more recently, AI workloads has made those requirements considerably more important.
India’s installed data-centre capacity has increased from about 375 MW in 2020 to around 1,575 MW in 2026, according to information provided by the Ministry of Electronics and Information Technology (MeitY) to Parliament in August. The government identified the rapid expansion of artificial intelligence and high-performance computing among the factors pushing up capacity requirements.
Commercial demand is moving in the same direction. JLL estimates that India had about 1.6 GW of data-centre capacity by mid-2026 and projects this to reach 6 GW by 2029. Absorption reached 101 MW in the first half of 2026, more than 20% above the average recorded over the previous three years. Pre-committed hyperscale capacity accounted for 82% of that absorption.
For REIT investors, this creates an unfamiliar proposition. Data centres can generate rental income from physical assets, much like offices, but their performance is tied much more closely to technology infrastructure and the availability of power. They also require substantial upfront capital. Understanding their place in a REIT portfolio therefore requires looking beyond the growth forecasts and into occupancy, development costs, customer concentration and the economics of operating these facilities.
AI is adding to an already expanding market
Cloud adoption had been driving data-centre development well before generative AI entered the mainstream. AI has added another source of demand because training and running large models requires high-density computing equipment, along with the power and cooling infrastructure needed to support it.
India’s public AI infrastructure offers some indication of the scale involved. Shared compute capacity under the IndiaAI Mission had crossed 45,000 graphics processing units (GPUs) by June 2026. By August, 237 projects had used 93.18 lakh GPU hours of subsidised computing capacity.
CRISIL Ratings sees public-cloud adoption, AI investment and the spread of 5G-enabled applications requiring low latency as important demand drivers. Among the third-party data-centre operators it tracks, CRISIL expects revenue to increase by 20-22% annually to around ₹20,000 crore by fiscal 2028. Capacity within this group is expected to reach 2.3-2.5 GW by March 2028.
The CRISIL and JLL projections should not be directly compared. CRISIL covers third-party colocation operators representing 75-80% of operational capacity and excludes captive facilities. JLL uses a broader assessment of India's data-centre market. The difference in scope and forecast period explains why their capacity estimates and projections vary.
Data centres are appearing in Indian REIT portfolios
Mindspace Business Parks REIT offers one of the clearest examples of direct exposure within India's listed REIT market.
At Mindspace Airoli West in Navi Mumbai, its disclosures identify two completed data-centre buildings of approximately 0.32 million sq ft each. Another data-centre building of about 0.25 million sq ft is under construction, approximately 0.49 million sq ft is also under construction, while around 0.32 million sq ft has been identified for future development. The two completed buildings were reported as fully operational.
The scale needs context. Mindspace reported 46.2 million sq ft of total leasable area across its portfolio as of 30 June 2026. Its committed occupancy was 95.8% excluding specified assets, and 92.1% including the recently acquired Chennai properties. These are portfolio occupancy figures, not utilisation rates for the data-centre assets.
India therefore remains some distance from markets where investors can access large listed REITs centred specifically on digital infrastructure.
What mature markets look like
Digital Realty and Equinix give some indication of the scale at which specialist data-centre REITs operate globally.
Digital Realty raised its 2026 development capex guidance, net of partner contributions, to $4.25-$4.75 billion in July. It expected an average stabilised development yield above 10%, while forecasting year-end portfolio occupancy measured by IT load to improve by 75-125 basis points. Same-capital cash net operating income was expected to grow by 4.25-5.25%.
Equinix reported 52 projects under way across 33 markets in July 2026. The company expects capital expenditure of $5-$6 billion during 2026 and raised its annual capex outlook for 2027-2029 to $5-$7 billion. Second-quarter revenue stood at $2.625 billion, 16% higher than a year earlier.
Demand is tight in several established markets. CBRE reported that vacancy across the four largest North American data-centre markets fell to a record low in the first quarter of 2026 despite inventory increasing 33% year on year. Northern Virginia recorded vacancy of 0.3%, while Singapore had the lowest vacancy among the major Asia-Pacific markets covered by CBRE at 2%.
These markets are useful benchmarks for understanding the asset class, rather than forecasts of how India will develop. Differences in electricity supply, land, regulation, customer mix and market maturity make a direct comparison difficult.
The capex behind the capacity
Rapid capacity expansion comes with a large funding requirement.
CRISIL expects the Indian operators it tracks to incur ₹55,000-65,000 crore of capex over fiscals 2026-2028. It expects the additional 1.1-1.3 GW planned during this period to secure customer tie-ups in time, with utilisation remaining around 90-95%, broadly in line with the previous three fiscals. Hyperscalers account for more than half of capacity tie-ups.
ICRA, using a different coverage universe, estimated investment of about ₹90,000 crore between FY2026 and FY2028 as third-party operational capacity increases from 1,250 MW in FY2025 to 2,400-2,500 MW by FY2028. The two investment estimates should therefore be read within the scope of the respective studies rather than treated as competing estimates of precisely the same market.
The global figures reinforce the point. Digital Realty and Equinix each expect to spend several billion dollars on development in 2026. Digital Realty's expected stabilised development yield of more than 10% is useful context, but it is not the same thing as an investor's return from owning REIT units. Development yields measure project economics; financing costs, operating expenses and other portfolio-level factors still have to be considered.
Electricity changes the property equation
Power availability is one of the constraints that separates data centres from conventional commercial property.
The Ministry of Electronics and Information Technology (MeitY) says existing Indian data-centre capacity accounts for less than 1% of the country's installed power capacity. It also cites a Central Electricity Authority estimate that power demand from data centres could reach about 17 GW by 2031-32. AI-oriented facilities introduce additional cooling requirements, including technologies such as direct-to-chip liquid cooling, immersion cooling and closed-loop liquid cooling.
Similar constraints are visible overseas. CBRE reported that power and grid limitations were influencing development schedules and site selection in several established markets in 2026. In Dallas-Fort Worth, 88% of the 716.7 MW under construction in the first quarter was already preleased, while grid-interconnection timelines remained a constraint. In parts of Chicago, power-delivery timelines stretch to 2032 or beyond.
Customer concentration is another consideration. CRISIL points to the bargaining power of hyperscalers and the possibility that large technology companies develop more captive capacity themselves. Either could put pressure on pricing for third-party operators. CRISIL notes that pricing on new contracts had been largely stable over the preceding two fiscals, making future pricing trends an important operating metric to follow.
What investors need to watch
The numbers explain the attention data centres are receiving. India has added substantial capacity, AI and cloud workloads are adding to demand, and new facilities are attracting large capital commitments. The experience of global specialist REITs also shows that digital infrastructure can exist as a sizeable institutional real estate category.
Its economics, however, differ from those of a conventional office portfolio.
Alongside occupancy and leases, investors have to consider power availability, pre-commitments, computing density, cooling infrastructure, development expenditure and exposure to a relatively concentrated group of large customers. A high utilisation rate does not by itself answer whether a project will deliver adequate returns on the capital required to build and operate it.
For India's listed REIT market, data centres remain an emerging part of the portfolio rather than its defining asset class. How far that changes will become clearer as the current development pipeline is completed and investors get a longer record of occupancy, operating performance and capital requirements from these assets.
Note to the reader: This article has been produced on behalf of the brand by HT Brand Studio and does not have journalistic/editorial involvement of Hindustan Times.
