Data Centres, Cloud and AI Infrastructure in India

Artificial intelligence has turned data centres into some of the most capital-hungry infrastructure of the decade, and India is one of its biggest beneficiaries: cumulative investment commitments now exceed US$100 billion, the great majority of it foreign. India is using tax policy and the scale of its demand to attract global cloud and AI infrastructure, most visibly through a long-horizon cloud-tax exemption enacted in the Finance Act 2026 and effective from 1 April 2026. But this is not a sector you enter the way you enter manufacturing or services. It is best understood as infrastructure — land, power, cooling, connectivity, tax structure and long-term customer offtake — and the right structure depends, before anything else, on which kind of investor you are.

Before the tax, the land or the incentives, the first question is which kind of investor you are, because the whole structure follows from it. There are three.

A hyperscaler — a global cloud or AI platform — needs very large blocks of capacity for its own services and either builds dedicated facilities or takes them through long-term leases and build-to-suit arrangements; India's cloud-tax exemption, with its notified-foreign-provider, Indian-operating-company and Indian-reseller architecture, is aimed squarely at this group. A colocation or wholesale operator builds capacity and leases it to others; it is, in substance, in the power-and-infrastructure business, the land question bites hardest for it, and its entry is typically a joint venture with a local developer or land-owner backed by a book of long-term customer leases. An enterprise customer — a bank, an industrial group, a global corporate taking capacity for its own workloads — usually does not build at all, but colocates or leases from an operator, which is the lightest structure of the three. The land approach, the tax position, the partner and the contracts each one needs follow from which of these it is.

The land position must be structured carefully, but it is not the barrier it is sometimes assumed to be. A foreign company itself cannot casually acquire Indian immovable property, but an Indian company with foreign investment may hold or lease land for its permitted business, subject to FEMA, the FDI policy, local land laws and the rule against foreign investment in real-estate business. The structure therefore has to show that the activity is an operating data-centre infrastructure business, not land trading or passive real-estate dealing; in practice investors use a wholly-owned operating company, a joint venture with a local developer or land-owner, or a long-term lease, colocation or build-to-suit arrangement. Power is the harder constraint. AI workloads draw enormous and continuous power, dense urban hubs — Mumbai, Chennai, the Delhi-NCR region and Bengaluru hold most of the tier-one capacity — are straining to supply it, and securing reliable power, increasingly renewable power, is now a structural requirement rather than a preference; the site decision is in large part a power decision, and with data-centre electricity demand projected to climb toward roughly 13 GW by 2031-32, green open-access and renewable procurement now sit at the centre of siting. Because power is both the largest operating cost and the gating constraint, the economics of a build turn on the power tariff, the energy efficiency achievable in India's climate, the capital cost per megawatt and the pace of lease-up — the site and power decision effectively sets the return. The states compete with their own data-centre policies — Maharashtra, Tamil Nadu and Uttar Pradesh among them — offering capital subsidies, electricity-duty and stamp-duty relief and concessional power, which layer on top of the central position. The land-border investment rule (Press Note 3) applies where the capital has a land-border, in practice Chinese, connection. Since Press Note 2 of 2026 (issued 15 March 2026) a beneficial owner of 10% or less with no control uses the automatic route with DPIIT reporting, while a larger or controlling holding needs prior government approval.

India and the UAE are both building major data-centre and AI-infrastructure positions, and many groups will enter both — but these are independent decisions, not an either/or. A company deciding on India wants the India structure; one deciding on the UAE wants the UAE structure. This page covers the India entry; the UAE opportunity — its state-backed AI-compute campuses, free-zone structuring, power sourcing and advanced-chip-access regime — is set out separately on our UAE data-centre page. Where a group does operate across both markets, the holding structure and the cross-border flows are designed together through the India-UAE corridor.