New Delhi [India], June 2 (ANI): India is poised to emerge as one of the world's most important AI and hyperscale infrastructure markets, driven by rapid expansion in data centre capacity, rising artificial intelligence workloads and strong policy support, according to Knight Frank India's latest report.

The report noted that India's data centre sector has entered a defining phase of expansion, with live IT capacity across the country's seven primary markets surpassing 1.6 GW by the end of 2025.

'India's data centre industry is entering a once-in-a-generation infrastructure cycle,' the report said, adding that the growth is being driven by 'AI-led digital transformation, hyperscale cloud expansion, sovereign data requirements and proactive policy support.'

The report highlighted that India added 371.5 MW of live capacity in 2025, following 361.6 MW added in 2024, reflecting a sustained growth cycle supported by strong demand from hyperscalers and AI-led workloads.

Cumulative colocation lease activity reached 2.06 GW in 2025, with AI emerging as a key demand driver. 'AI-related colocation leasing alone reached 348 MW during the year, more than doubling compared with 2024,' the report said.

It added that 'nearly 20 per cent of total demand' is now linked directly to AI-related workloads, underlining the structural shift in demand patterns across the sector.

Knight Frank India observed that the sector has transformed from a fragmented infrastructure base into a strategic asset class.

'The sector, which has evolved from a fragmented infrastructure ecosystem into a strategic institutional asset class over the last decade, is now witnessing unprecedented momentum,' it said.

On regional growth, the report said Mumbai continues to dominate the market, accounting for nearly 47 per cent of India's total live capacity.

'Mumbai retained its position as India's largest and most mature data centre market,' the report said, while also noting the emergence of Chennai and Hyderabad as key growth hubs supported by subsea connectivity and AI-focused infrastructure demand.

Hyderabad, in particular, is rapidly emerging as an AI infrastructure hub, with global cloud providers expanding their presence and new hyperscale regions expected to go live in the coming years.

The report also highlighted large-scale investments and project announcements in Tier-II cities, including Visakhapatnam, which is witnessing gigawatt-scale development plans backed by major global and domestic players.

'Visakhapatnam and Jamnagar signal India's next wave of AI infrastructure growth,' the report said, pointing to multi-billion-dollar investments and planned AI-focused campuses.

According to Knight Frank, regulatory and policy developments such as data protection rules and sovereign AI initiatives are also reshaping demand for domestic infrastructure.

'The implementation of India's Digital Personal Data Protection (DPDP) Rules... marks one of the most significant structural demand drivers for the data centre sector,' it noted.

Despite strong momentum, the report flagged execution challenges, particularly around power availability, transmission capacity and regulatory approvals, even as capital commitments continue to rise.

At the same time, major global and domestic firms have announced large investment plans in India's data centre ecosystem, reinforcing long-term confidence in the market's growth trajectory.

Commenting on the outlook, the report said regional specialisation is becoming a defining feature of the sector's evolution.

'India's data centre growth story is increasingly becoming a tale of regional specialization,' it said, adding that Mumbai, Hyderabad, Chennai and emerging hubs like Vizag are each developing distinct roles in the country's digital infrastructure landscape.

Overall, Knight Frank concluded that India is on course to become a globally significant hub for hyperscale and AI-driven digital infrastructure over the coming decade, despite ongoing supply-side constraints. (ANI)