Real Estate
India’s real estate sector is witnessing a paradigm shift. Traditional investments like office spaces and malls are being overtaken by high-growth, future-focused segments: data centres and warehousing. These are not mere structures but essential components of the country’s digital economy and e-commerce ecosystem. As long-term infrastructure investments, they offer stable returns, lower risk, and strategic value – positioning them as the next big trend in real estate.
Table of Contents
1. Growth of Data Centres in India
India’s data consumption is skyrocketing with the rise of mobile internet, cloud computing, and AI. This has catalyzed demand for data centres, massive facilities housing servers and IT infrastructure. Cities like Mumbai, Chennai, and Hyderabad are emerging as major hubs due to:
- Reliable power and cooling infrastructure
- Access to undersea cable landing stations
- Government incentives and fast-track approvals
Major players such as AdaniConneX, STT GDC, and Reliance are spearheading this growth. India is expected to double its data storage capacity by 2026, offering strong potential for investors.
2. Warehousing Surge Driven by E-commerce
The boom in e-commerce and 3PL logistics has revolutionized warehousing. Companies like Amazon, Flipkart, and Reliance Retail require large, well-connected warehouses near urban centres.
Top warehousing clusters include:
- Bhiwandi (Mumbai)
- Pune
- Hosur (Bengaluru)
- NCR
- Hyderabad
Warehousing now goes beyond storage – it’s about strategic inventory management and last-mile delivery, making it a cornerstone of India’s supply chain infrastructure.
3. Why Infrastructure Assets Are Attracting Investors
Post-pandemic, investors have grown cautious of retail and commercial office spaces due to high vacancy and lower returns. In contrast, infrastructure real estate offers:
- Long lease terms (up to 20 years)
- Low tenant turnover
- Higher annual rental yields (8-11% for data centres)
- Essential service classification
Global and domestic funds are shifting to these assets for stable, inflation-protected returns.
4. Strategic Location Considerations
Location is critical for success:
Data Centres Require:
- Continuous, high-quality power
- Access to fibre optic networks
- Proximity to tech parks and city cores
Warehouses Need:
- Connectivity to national highways and ports
- Proximity to consumption zones
- Large tracts of affordable land
Choosing correctly aligned zones helps reduce costs and maximizes returns.
5. Yield Comparison
| Property Type | Rental Yield | Typical Lease Duration |
|---|---|---|
| Data Centres | 8% – 11% | 10 – 20 years |
| Warehousing | 7% – 9% | 5 – 10 years |
| Office Spaces | 5% – 7% | 3 – 9 years |
6. Key Investment Hubs in India
New development zones are gaining traction:
- Chennai – for data centres due to undersea cables
- Pune & Hosur – warehousing for auto and e-commerce
- Hyderabad – growing tech and logistics base
- Lucknow & Coimbatore – emerging logistics zones
7. Sustainability in Infrastructure Real Estate
Green infrastructure is now a must-have. Investors and tenants prefer IGBC/LEED-certified buildings that feature:
- Solar rooftop systems
- LED lighting & IoT sensors
- Rainwater harvesting
- Smart cooling systems
Green-certified assets attract better tenants and qualify for REIT inclusion.
8. Financing Models & REIT Prospects
Entering this segment is now easier with:
- REITs for fractional ownership and regular income
- Private Equity and JV models
- Sale-leaseback deals for capital efficiency
India’s infrastructure REIT market is evolving rapidly, with data centre and logistics REITs gaining momentum.
9. Regulatory and Land Acquisition Challenges
Challenges include:
- Zoning and land-use constraints
- Delays in utility connections
- Environmental clearances
States like Maharashtra, Tamil Nadu, and Telangana are offering fast-track approvals and single-window systems to reduce investor hurdles.
10. Infrastructure’s Impact on Land Value
Government-led projects such as Bharatmala, DMIC, and DFC have a multiplier effect:
- Land value appreciation
- Increased job creation
- Boost to demand for warehousing/logistics assets
Investing before such developments materialize can lead to exponential gains.
11. Strategic Takeaways for Investors
- Focus on location and connectivity
- Prioritize clear land titles and compliance
- Embrace green tech and design
- Partner with domain specialists
- Leverage REITs for diversification
12. Outlook: What Lies Ahead
India’s digitization and consumption trends will continue to power demand for data centres and warehouses. With strong government support and evolving investment instruments, this asset class offers unmatched potential for yield and stability.
Now is the time for forward-thinking investors to reposition their portfolios towards infrastructure real estate.
Explore more insights on infrastructure and emerging real estate trends at Urvik Consulting