India's listed Real Estate Investment Trusts (REITs) market is swelling in size, gaining in market cap and rivalling that of the Hong Kong market, another fast-growing hub. The five listed REITs have assets to the tune of 195 million sq ft with an upcoming pipeline of around 37 million sq ft as of March 2026, as per a Colliers report.

Yet, most of their assets — around 84% of the operational portfolio of these REITs belong to the office space segment. To diversify their portfolio and avoid concentration risk, they are eyeing data centres.

Among them is Mumbai-headquartered Mindspace REIT, which operates around 0.63 million square feet (msf) of data centre space for Singapore-based Princeton Digital Group. It has also acquired land to set up another 1 million square feet worth of data centre capacity at Airoli. The REIT, which is promoted by real estate developer K Raheja Group, provides the real estate space for data centres which are operated by partners.

As India's commercial real estate market evolves, REITs are weighing whether data centres can bring in higher yields and long-term cash flows needed to complement portfolios still dominated by office properties.

Why Data Centres?

Data centres provide the REIT with an entry into the new-age business themes of AI, on top of its investments into office spaces with business parks.

“A diversified portfolio allows us to benefit from different growth opportunities within commercial real estate. Mindspace REIT is currently the only REIT listed in India with data centres as part of its portfolio, reflecting our approach of combining our core office business with emerging opportunities,” Ramesh Nair, CEO & MD of Mindspace REIT, told The Core.

According to Bernstein, the key differentiator in India's data centre market is the combination of land and power. REITs already control one half of that equation through their large land banks and expertise in developing commercial real estate, positioning them to expand into data centres.

“Data centres are becoming an important part of the real estate market as demand for cloud, AI and digital services continues to grow. They complement our office portfolio and give us exposure to a fast-growing segment. We see this as an important long-term opportunity that strengthens the overall portfolio while keeping us aligned with evolving business needs,” said Nair.

Foreign Investors Gain Ground

According to Shobhit Agarwal, CEO of Anarock Capital, data centres have become one of the best-performing types of real estate. He reckons that mostly the bigger and more specialised REITs do it first, because data centres need space, power, and technical know-how.

“The REIT world as a whole will probably be cautious until the business model is proven and cash flows can be seen,” he said.

While Indian REITs are proceeding with caution, internationally, REITs like Equinix and Digital Realty in the US are key players in the data centre space.

International institutional investors have been very active in the data centre space in India too. Amongst them is Singapore-based REIT CapitaLand, which operates business parks as well as data centres in India. It already has a 110 MW Mumbai data centre running and a couple more under construction at Hyderabad and Chennai — with a cumulative capacity of 200 MW.

Gauri Shankar Nagabhushanam, the CEO of CapitaLand India Trust, said that the data centre capacity is quite good, and that his entire Navi Mumbai facility is pre-leased.

“For institutions which are looking at locking in long-term receivables from very safe tenants, data centres are very attractive. That's why the valuations of data centres are so sought after, especially in the West,” he told The Core in a podcast.

According to JM Financial, listed US data centre REITs command rich valuations. Equinix traded at an estimated FY25 price-to-earnings multiple of 62.3x, while Digital Realty was valued at 105.4x and Iron Mountain at 42.5x. The report attributes the premium to their co-location business model, which typically commands higher valuations than data centre operators that primarily lease capacity to GPU owners.

Co-Location Models Matter

REITs bank on predictable income, which allows them to keep up with their distribution schedules. To be able to assimilate data centres into the mix, experts said that the quality of tenants is key to remaining in the green.

“They (REITs) have to focus on assets that are profitable in terms of long leases and good tenants and with convincing power arrangements. This will let them handle a smaller chunk of the 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 Agarwal.

Data centre businesses have different operating models – co-location, wherein the players own infrastructure but not compute hardware; and cloud providers who also own compute hardware.

“In this B2B (co-location) model, companies lease data centre infrastructure to hyperscalers, neocloud operators, or enterprises and earn fixed lease rentals. The customer brings their own GPUs, etc. Colocation is more capital-efficient and shifts GPU ownership and technology risk to the customer,” explains a report by Bernstein.

Tenants in co-location models are more invested in the data centre capacity. “We are in the co-location model. The tenant is putting in more capex, two times more capex than what you are putting. This is a bit more attractive for institutions because the tenant is really committed and sticky. These are like billion-dollar capex that one has to put in,” adds Nagabhushanam.

Office Spaces Vs Data Centres

Apart from other benefits, the data centre story is a rapidly scaling growth story. India’s current co-location capacity is at around 1.5 GW and is expected to grow to 5-8 GW by 2030, as per Bernstein.

“Slower-than-desired capacity addition in the past has steepened the demand-supply mismatch, ushering in a cyclical boom in DC capacity expansion. Rising data consumption/generation, favourable policy, data localisation push and a thriving start-up ecosystem are factors driving DC demand,” says a J M Financial report

Comparably, data centres are much more ‘sought after’ than office spaces and give investors a taste of the new-age business pie.

“The reasons are simple — there isn’t much supply but a lot of demand, and AI is rapidly growing in capacity. Prime data centres in core markets are delivering very good yields, while older retail assets and offices tend to trade on slower growth and higher occupancy pressure,” said Agarwal.

Data centres offer better yields as well as growth opportunities. “From a REIT/InvIT perspective, data centres in India are likely to eventually gain prominence in the long-term, given their strong demand outlook, well supported by long-tenure leases and stable and predictable cash flows. Interestingly, data centre projects typically offer higher risk-adjusted yields of about 16-17%, compared to the sub-10% yields in office, retail & warehousing segments,” said Nadar.

While its uptake is increasing, the slice of data centres in the total listed REIT pie is all but negligible as per a report by Credai and Anarock as of 2025 – with 80% of office spaces and the rest being industrial.

But it predicts better diversification by 2030, with offices accounting for 50%, retail at 30%, diversified assets at 10%, with industrial and data centres at 5% each.

How Do REITs Differ?

While growth and diversity are an important part of a REIT's overall success, most REITs are guided by the distribution of earnings. In fact, most Indian listed REITs have been at the forefront of this promise of late — they distributed a record Rs 2,566 crore to over 4.25 lakh unitholders during the fourth quarter of FY26.

REITs depend on the tried-and-tested model of collecting rents on their assets – mostly retail and office spaces – and distributing them to investors.

Data centres, on the other hand, are costlier to own.

As per a JM Financial report, data centres require Rs 46.5 crore per megawatt as capex, and could be much longer-gestation than other retail assets, be it office spaces, retail or even industrial & logistics sectors.

The question remains – can REITs with high exposure to data centres keep up with their distribution schedules?

“They can,” said Agarwal, adding, “but only if most of the data centre’s assets are stable rather than with most of its assets still under development. Because high capex and long development times can make short-term payouts more difficult, many REITs prefer to buy operating assets, do sale-leasebacks, or phased deals. That makes distributions smoother while still letting them benefit from the growth of the sector.”

All in all, Indian REITs are still in the phase of taking baby steps towards this new asset class.

“While a few office-focused REITs have included data centres as secondary assets to diversify income streams, data centres are yet to emerge as a primary asset class within the portfolio of Indian REITs/InvITs. Data centres are capital-intensive, long-gestation assets requiring robust power infrastructure and specialised expertise. While India's stock of institutional-grade data centres remains nascent relative to global markets, the sector offers immense potential to be included in future REITs/InvITs,” Vimal Nadar, national director & head of research at Colliers India, told The Core.

For now, data centres remain a small slice of India's listed REIT market rather than a defining asset class. But as AI adoption accelerates, cloud demand grows, and institutional capital chases long-term, predictable cash flows, the sector is likely to become an increasingly important part of REIT portfolios.

The winners may not be those that build the most capacity, but those that can balance higher-growth assets with the steady distributions that remain at the heart of the REIT model.