Tax Holiday Fuels Long-Term Growth in India's Data Centre Sector
The new tax holiday for data centres in India is being framed as a structural, multi-decade theme that could steadily benefit both power and real estate sectors, rather than a short-term Budget trade. Under the Union Budget 2026 proposals, foreign companies that use India-based data centres to serve overseas customers will get an income-tax exemption on that offshore revenue up to 2047. Additionally, Indian captive operators will receive a 15 percent “safe harbour” margin on cost, providing global cloud players and their Indian partners with unusually long policy visibility.
For real estate, this effectively underwrites demand for specialized data-centre parks for the next 15–20 years. Each megawatt of IT load translates into large, power-dense facilities with long leases and high entry barriers. India’s data-centre capacity, estimated just above 1.3 GW in 2024, is forecast to rise to 5 GW by 2030. AI and hyperscalers like AWS, Microsoft, and Google are expected to drive as much as 80 percent of incremental demand between 2024 and 2027. This creates a pipeline of projects for developers with land, approvals, and technical expertise—such as Anant Raj, Techno Electric, and large conglomerates building data-centre campuses—as well as for REIT-style structures that can own and lease out these assets.
On the power side, the policy reinforces what investors already see on the ground: data centres convert digital demand directly into long-duration, contracted power offtake. A single hyperscale site can draw as much electricity as a mid-sized city, and industry estimates suggest that data centres alone could add power demand equivalent to 3–4 percent of India’s current installed capacity over the next five years. This underpins multi-year volume visibility for utilities, grid companies, and equipment makers—especially those supplying transformers, switchgear, diesel and gas gensets, UPS systems, and cooling infrastructure. Broker commentary highlights proxy beneficiaries such as Cummins India and other power-equipment suppliers.
The multi-decade angle comes from the combination of AI-driven workloads, rising cloud adoption, and now a tax regime that runs out to 2047. This long-term policy framework is expected to attract significant investment and foster sustainable growth in the data centre sector, benefiting both the real estate and power industries.
