Data centres attract more real estate investment than other assets

In the April-June 2026 quarter, private equity investment in India’s real estate sector increased by 25% year-on-year. The market reached $2 billion in private equity investment during this quarter. The biggest share of investment went to data centres, which received about 38%. During the April-June period, data centres attracted more investment than the traditional office real estate sector. In the first six months of 2026, total PE investment in Indian real estate rose by 33% to $3.2 billion.

The biggest question is why data centres are attracting such high investment compared with other real estate assets. The reason lies in the rapid increase in demand for India’s digital services. The growth of AI is increasing the need for more data centres. Powerful computer servers in data centres store and process large amounts of information.

The demand is not only for data storage. It also comes from cloud computing, online shopping, digital payments, video streaming and AI services. Investors are putting money into data centres because they see strong potential for future growth and returns.

Moreover, data centre capacity is also increasing rapidly. India added 258 MW of new data centre capacity in the first half of 2026. This was a 59.3% increase compared with the same period in 2025.

India’s total operating data centre capacity has now reached around 1.8 GW. Around 500 MW of additional data centre capacity is expected to be added during 2026. The country’s total data centre capacity is expected to grow by around 30% this year.

Foreign investors have also shown strong interest. Around 69% of foreign investment in India’s real estate sector went into data centres and hotels during the first half of 2026. Foreign investors accounted for 48% of total private equity investment in Indian real estate during the first half of 2026.

The foreign investment mainly came from countries such as the US and Canada. However, major challenges remain, particularly the availability of land and electricity. The growth of data centres is also creating new demands. Data centres require large amounts of land as well as a huge and reliable supply of electricity.

Finding suitable land and securing sufficient power is becoming difficult in some major data centre markets. Because of this, data centre companies may start looking at new locations and cities.

Local governments will also have an important role to play in helping companies access land and power.

Big technology companies are expanding their presence in India. The country is witnessing major multinational companies such as Amazon, Microsoft and Google expanding their data centre operations. Microsoft is also planning to open its biggest data centre in India in 2026.

Other real estate sectors are also attracting investment. Investors are not putting money only into data centres but also into institutional assets such as hotels, which received 8% of total investment in the first half of 2026.

Student housing received 3%, while office buildings continued to be important, especially for domestic investors. About 68% of domestic PE investment went into office assets during the first half of 2026.

Now, what do these statistics mean for the Indian real estate sector?

Data centres are becoming an important part of India’s real estate market. The sector is creating new demand for land, buildings, electricity and infrastructure.

Where data centres are built, they could lead to greater development in the surrounding areas. Investors are also becoming more interested in alternative real estate assets, instead of focusing only on offices and residential projects.

The trend shows that AI and digital growth are starting to influence India’s real estate market to a greater extent.

India’s real estate investment story is changing as data centres attract a major share of private equity money. At the same time, AI and digital services are increasing demand for land, power and specialised infrastructure.