Why Chennai is losing to Hyderabad in India's data centre race

Hyderabad is set to add twice as much data centre capacity as Chennai by 2030, as land and power constraints push hyperscalers towards newer hubs such as Visakhapatnam.

Hyderabad could overtake Chennai as India’s second-largest data centre market within the next four years, as land and power constraints limit Chennai’s ability to add new capacity.

Hyderabad is expected to add 695 megawatts (MW), or exactly twice the total data centre capacity Chennai is projected to add, at 347MW over the next four years, according to an 8 September report by real estate consulting firm Cushman & Wakefield.

Stakeholders that Mint spoke with and reports reviewed point to a widening infrastructure advantage for Hyderabad, as the availability of land, power and large-scale campuses draws data centre investments away from more constrained locations such as Chennai.

India’s data-centre industry is entering a rapid expansion phase, with operational capacity expected to more than triple from 1,789 MW in June 2026 to about 5.65 GW by the end of 2030, implying annualized growth of 33%, according to Cushman & Wakefield. Meeting this demand will require significant capital, with JLL estimating that the sector needs about $110 billion in investments through 2029.

Capacity race

By December 2030, Hyderabad is expected to account for 15%, or 838MW, of India’s operational data centre capacity. Chennai, with a projected 562MW, will account for 10% of the country’s 5.65 gigawatts (GW) of capacity. Mumbai, by far, will remain India’s largest data centre market, with an expected 2.63GW of capacity.

Vijay Agrawal, managing director of infrastructure at Equirus Capital, said a key challenge for Chennai, which today has about 50% more operational data centre capacity than Hyderabad, is the concentration of data centre clusters, which is straining land availability and infrastructure development.

“Ambattur (in north-west Chennai) and Siruseri (to the south) have developed strong ecosystems, but further concentration increases pressure on land and utilities. Shortage of large land parcels there, and the absence of a third area where data centres can be built, are significant constraints, particularly for hyperscale projects requiring hundreds of acres and long-term power visibility,” Agrawal said.

New hubs

That constraint is helping newer locations attract the next wave of large data centre projects.

In Hyderabad, Microsoft’s latest data centre was operationalized on 21 September, while Tata Consultancy Services has planned a 1GW data centre. In Visakhapatnam, Google is constructing a 1GW data centre in partnership with Adani Enterprises, while Meta Platforms, in partnership with Sify Technologies, has announced a 500MW data centre plan.

The advantage for these regions is the availability of land and state governments’ willingness to facilitate data centre investments.

On 27 August, Alexander Smith, principal for global infrastructure, Asia-Pacific at Google, told Mint in an interview that the “single-window approval system” offered to the Big Tech firm by the Andhra Pradesh government enabled the company to “chase multiple approvals at the same time—allowing us to go from early site visit to ground-breaking to full-scale construction phase in less than two years.”

Recent capital also reflect the shift. A September report by US-based real estate consultancy CBRE said Andhra Pradesh was the top recipient of data-centre investment commitments in India between January 2021 and June 2026, accounting for $29.5 billion, or 17%, of the $173 billion committed during the period. Maharashtra accounted for $21 billion (12%), followed by Telangana at $15.5 billion (9%) and Tamil Nadu at $7 billion (4%).

Land advantage

Shobhit Agarwal, chief executive of Anarock Capital Advisors, said that for Hyderabad, “the main drivers are availability of large contiguous land parcels, scalable power and renewable energy options, and the ability to design purpose-built campuses at gigawatt scale. Hyderabad already has strong hyperscaler momentum, while Visakhapatnam is emerging as a new AI hub.”

This does not mean Chennai is losing its relevance. It is expected to remain among India’s top three data centre markets even as Hyderabad adds capacity faster, while Visakhapatnam could eventually emerge as another major hub.

“Chennai retains advantages in sub-sea connectivity, existing infrastructure, customer proximity and an established operator ecosystem. Importantly, advances in data centre technology are changing the land equation, and higher rack densities, improved power distribution and more efficient cooling allow operators to deploy significantly more capacity within existing footprints,” Anarock’s Agarwal said.

“This enables Chennai to leverage its mature power, fibre, connectivity and data-centre infrastructure, giving it a structural advantage in expanding capacity despite limited land availability.”

Sanchit Vir Gogia, founder and chief analyst at tech consultancy Greyhound Research, said that Chennai has begun work on a third region for its data centres beyond Ambattur and Siruseri.

“That instinct is right. Power and fibre are the lifeblood of a parcel, and a cheaper site loses its advantage if its substation is switched on after the customer needs the capacity,” Gogia added, underlining the need for power infrastructure buildout in the region as well, to remain relevant.