REITs eye data centres as AI demand rises, but high costs limit expansion
Aug 25,2026
Data centres offer REITs exposure to rising AI and cloud demand, but high upfront investments, longer stabilisation periods and technological complexity could restrict meaningful participation to a handful of players
India’s office-focused real estate investment trusts (REITs) are beginning to venture into data centres as demand from cloud computing and artificial intelligence workloads surges. However, high capital requirements and longer stabilisation periods could limit meaningful participation to a handful of well-capitalised trusts, industry executives said.
CapitaLand India Trust (CLINT) and Mindspace Business Parks REIT are among those building exposure to the segment, although emerging
models involve partnerships, external capital or partial ownership to share the investment and development risks associated with data centres.
The economics of data centres differ considerably from conventional office assets, which can be extensively pre-leased and subsequently added to REIT portfolios as stabilised, income-generating properties.
Data centres require substantially higher upfront capital and can take longer to develop and stabilise. While facilities built to suit hyperscalers or data-centre operators offer greater visibility on future revenues, speculative developments carry higher occupancy risk — something that could sit uneasily with REIT investors accustomed to predictable rental income and regular distributions.
Industry estimates suggest setting up 1 MW of data-centre capacity in India requires more than $10 million, or around Rs 96 crore, including investments in land, servers, chips and cooling equipment, although costs vary depending on workloads.
This could make data centres an attractive diversification opportunity for REITs without necessarily allowing them to become a large part of every trust’s portfolio.
“It helps to have a hyperscaler or enterprise-backed cash flow profile, but it is important to watch out for concentration risk. It is safer to have a mix of operating facilities, partial stakes or partnerships rather than to make an aggressive play on development,” said Shobhit Agarwal, CEO of Anarock Capital.
Data centres require a different capital model
Office REITs have gained acceptance among institutional investors on the back of operational office assets — along with malls and, in some cases, hotels — that generate relatively steady rental income, which is distributed to investors largely on a quarterly basis.
Office properties can also be developed by sponsors before being offered to the REIT through right-of-first-offer arrangements, allowing the trust to acquire assets after they have reached an appropriate stage of maturity.
Data centres, in contrast, can require large amounts of capital well before the assets start contributing meaningful rental income. This is pushing REIT managers towards structures that allow them to participate in the sector while limiting the amount of development risk sitting directly on the trust.
CLINT looks to recycle capital
Singapore-listed CLINT, sponsored by Temasek-backed CapitaLand Investment (CLI), is among the more aggressive players in the segment, with around 200 MW of gross data-centre capacity under development in India.
Its data-centre footprint includes a major campus in Navi Mumbai as well as facilities in Bengaluru, Hyderabad and Chennai.
CLINT has also brought external capital into its data-centre strategy. CapitaLand India Data Centre Fund (CIDCF) acquired a 20.2 percent interest in three CLINT data-centre assets in February 2026, allowing the trust to monetise part of its investment while retaining a 79.8 percent interest in the portfolio.
The structure gives CLINT an avenue to recycle capital while continuing to participate in the growth of the assets.
The strategy has begun yielding revenue. CLINT’s first 50 MW of gross capacity at its Navi Mumbai data centre has been fully leased, made operational and handed over to a global hyperscaler. The trust said the facility contributed to higher property income during the first half of 2026, with full income contribution expected from August.
CLINT had also pre-leased 53 percent of the gross power capacity across its three data centres under development in Navi Mumbai, Hyderabad and Chennai by January 2026.
Gauri Shankar Nagabhushanam, CEO of CLINT, said data centres required a different approach to capital allocation.
“While data centres are more capital-intensive than traditional office assets and typically involve longer development and stabilisation periods, they also benefit from strong structural demand and long-term customer commitments from high quality tenants. The key is to adopt a disciplined capital allocation strategy,” Nagabhushanam said.
“Our approach is to develop and stabilise these assets, while selectively monetising assets or stakes when the opportunity arises,” he added.
Such monetisation allows the trust to recycle capital into new growth opportunities and enhance financial flexibility, Nagabhushanam said.
Mindspace uses partnerships to limit exposure
Among India-listed REITs, K Raheja Corp-sponsored Mindspace Business Parks REIT has also built exposure to data centres as part of a broader diversification beyond its core office portfolio.
Mindspace’s portfolio already includes completed data centres, while it has also been expanding into other asset classes, including hotels.
The REIT has worked with Warburg Pincus-backed Princeton Digital Group (PDG) in the data-centre segment. Mindspace has said its completed and future data-centre portfolio is expected to comprise five facilities with a footprint of around 1.7 million square feet and more than 250 MW of capacity.
“A diversified portfolio allows us to benefit from different growth opportunities within commercial real estate. Data centres are becoming an important part of the real estate market as demand for cloud, AI and digital services continues to grow, complementing our office portfolio and providing exposure to a fast-growing segment,” said Ramesh Nair, MD and CEO of Mindspace REIT.
The different structures being adopted underscore the challenge for REITs looking to capture data-centre growth without compromising the relatively stable cash-flow characteristics investors expect from the asset class.
For trusts with strong sponsors, access to capital and specialist partners, data centres could provide another source of growth as India’s digital infrastructure expands. But high upfront investment, longer gestation periods and operating complexity mean the opportunity is likely to remain concentrated among REITs capable of absorbing those risks.