The tax holiday announced for data centres in the budget is expected to increase demand for large industrial land parcels, accelerate data centre leasing and campus development, and draw long-term foreign capital into India’s industrial and commercial real estate markets, particularly in power-rich peripheral urban locations.As part of its push to position India as a global data, cloud and AI hub, the government has announced long-term tax incentives, including tax holidays and related fiscal support, for data centres and cloud infrastructure providers.The incentives are also likely to help attract hyperscale investments, anchoring on-shore digital infrastructure and strengthening India’s competitiveness against established data centre markets in Asia-Pacific and Europe.“India’s rapid digital adoption is driving unprecedented demand for AI-ready data centres. Securing land and power for new campuses will be critical for the growth and the proposed tax holiday will draw sustained investment into the sector, enabling scalable growth of hyperscale infrastructure nationwide,” said Pratap Mane, President & Country Head – India, Colt DCS.Additionally, according to him, the 15% safe harbour for related-party data centre services simplifies operations for global players and improves cost efficiency.Microsoft India, Amazon Data Services India, Colt DCS, STT Global Data Centres, NTT Global Data Centres, and Blackstone’s data center platform are among key entities that have acquired land parcels to set up data centers.“The announcement of a tax holiday till 2047 for foreign cloud service providers will significantly accelerate data-centre growth in India by attracting global hyperscalers, deepening long-term investment in the segment, boosting capacity creation, and positioning India as a preferred hub for digital infrastructure and cloud-led economic expansion,” said Vimal Nadar, National Director & Head, Research at Colliers India.The expected rise in new investments may also heat up the competition for land and result in prices increasing, particularly in strategically located urban corridors. ETtech
Big budget bizFrom a real estate standpoint, the incentive improves project economics for data centres, which are among the most capital-intensive asset classes.A typical hyperscale facility requires 10-15 acres for around 50-60 MW of IT load, depending on design and expansion planning, along with high-capacity power infrastructure, advanced cooling systems, and dense fibre connectivity.Capital expenditure typically ranges from $6-8 million per MW, and can be higher for advanced or AI-focused facilities, making tax efficiency a critical driver of returns.By reducing the effective tax burden, the data centre tax holiday shortens break-even timelines, boosts returns, and encourages higher capital deployment, attracting global infrastructure funds, pension capital, and sovereign investors.It is also likely to influence land strategies, with developers accelerating land aggregation and long-term leases in peripheral urban zones and industrial corridors, including Navi Mumbai, Chennai, Hyderabad, Noida, and select non-metro locations.India’s installed data centre capacity could reach around 14 GW by 2035, and a tax holiday until 2047 allows phased, campus-style expansion, spreading digital infrastructure beyond major metros, lowering costs, and supporting stable occupancy and valuations.



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