India’s GIFT City Strives to be a More Attractive Global Financial Hub: Latest Developments
A growing number of financial institutions and businesses are establishing themselves in GIFT City, including banking, ITeS, leasing, and family office units. The International Financial Services Center (IFSC) here is proactively focused on attracting and retaining skilled professionals by making concerted efforts to improve social infrastructure, connectivity, and accessibility, besides providing businesses with clarity on available tax and investment benefits and the applicability of regulatory reforms.
The Global Financial Centres Index 2023 ranks India’s GIFT City at 67, moving up from 75, in its ranking of international financial services hubs. The international financial centers in New York, London, Singapore, Hong Kong, and Los Angeles rank in the top five on the global index, while Tokyo and Dubai stand at 21 and 22, respectively.
The GIFT City IFSC, however, is making steady progress. As of 2023, it hosts a diverse range of funds and banking institutions, with over 40 funds amassing a substantial US$15 billion.
GIFT City’s overarching goal is to repatriate a substantial amount of funds to India’s onshore markets, establish a conducive “sandbox” for fintech innovation, and potentially influence the trajectory of India’s economic landscape.
Looking ahead, the existence of robust and fluid capital markets here is expected to accelerate GIFT City’s stature among global financial markets.
In terms of infrastructure development, GIFT City has been focusing on expediting its infrastructure projects, with a strong emphasis on constructing office spaces and residential areas. Regarding the regulatory framework and tax incentives, although GIFT City offers appealing tax benefits, it still faces challenges in matching the comprehensive regulatory frameworks of Hong Kong and Singapore.
Still, recent data show an increase in the number of financial institutions and businesses establishing their presence within the city. The IFSC is actively working to attract and retain skilled professionals and striving to enhance its connectivity and accessibility.
Latest developments and investments
Recent developments in GIFT City, Gujarat, have sparked a wave of new investments, showcasing the growing confidence in the city’s potential as a financial and technology hub.
Emerging tech-driven ecosystem with the entry of global giants
The start of operations by global giants Google and Capgemini within the domestic zone of GIFT City is a significant endorsement of the city’s business-friendly environment and its ability to attract major international players. This move not only highlights GIFT City’s scope as a destination for global businesses seeking to expand their operations in India but also underlines its emergence as a technology-driven ecosystem equipped to meet the demands of the digital age. The presence of these global giants will ensure attraction and retention of skilled talent.
Family Investment Funds (FIFs) in GIFT City
NRN Catamaran, under the guidance of Infosys luminary NR Narayana Murthy, is poised for significant expansion as it embarks on setting up a family investment fund (FIF) in Gift City. With an already impressive portfolio exceeding US$1 billion, Catamaran is committed to reshaping investment opportunities within alternative asset classes, encompassing both listed and unlisted securities as well as tangible assets. MD Ranganath, the Chairman of Catamaran, acknowledges the immense potential of Gift City in facilitating overseas investments with Indian capital, drawing parallels to established international financial hubs Singapore and Dubai. Through strategic utilization of Gift City’s unique attributes, Catamaran is set to realize a substantial assets under management (AUM) target of US$2 billion by 2027.
The establishment of FIFs offers numerous benefits for both the funds and the city itself. FIFs, as specialized investment vehicles, cater to the unique investment preferences and wealth management needs of ultra-high-net-worth families, providing them with a structured platform to manage and diversify their assets across various investment avenues. By setting up FIFs in GIFT City, these families can take advantage of GIFT City’s conducive regulatory environment, tax benefits, and comprehensive financial ecosystem, enabling them to optimize their investment strategies and enhance their wealth management capabilities. Simultaneously, the presence of FIFs in GIFT City contributes to its growing appeal as a preferred destination for international family offices.
Some of the benefits provided to FIFs in GIFT City are listed below:
Tax benefits: FIFs operating in GIFT City can take advantage of various tax incentives, including exemptions from goods and services tax (GST), dividend distribution tax, and capital gains tax. These exemptions significantly enhance the profitability and investment returns for the family investment funds.
Regulatory environment: GIFT City offers a well-defined and investor-friendly regulatory framework, ensuring transparency, accountability, and compliance for the operations of FIFs. The streamlined regulatory processes and a business-friendly environment contribute to the ease of conducting financial activities and managing investments efficiently.
Infrastructure and amenities: GIFT City provides state-of-the-art infrastructure, modern office spaces, and advanced technological facilities that facilitate seamless operations for FIFs. The presence of robust infrastructure, along with access to cutting-edge technologies fosters a conducive environment for investment management and enables FIFs to streamline their operations effectively.
Global connectivity: GIFT City’s strategic location and connectivity to major domestic and international markets provide FIFs with enhanced access to a diverse range of investment opportunities and global asset classes. The city’s connectivity through air, road, and rail networks enables FIFs to establish and strengthen global investment linkages, contributing to the diversification and growth of their investment portfolios.
Diverse investment opportunities: GIFT City offers a diverse range of investment opportunities across various sectors, including finance, technology, real estate, and infrastructure. The availability of a broad spectrum of investment options allows FIFs to explore and capitalize on emerging market trends and capitalize on lucrative investment prospects both within India and globally.
Setting up of two Australian university branches
Two Australian universities, Deakin University and the University of Wollongong, have set up their campuses in the GIFT City aligning with India’s New Education Policy goals.
Deakin University, with a 25,000 sq. ft campus in GIFT City, has already opened its applications for the July 2024 intake, with an annual fee of AUD 19,000. The university will offer two courses at the beginning, Masters programs in cyber security (professional) and business analytics.
The University of Wollongong, which will open its campus in July 2024, has announced a global collaboration for women in Fintech by leveraging their campuses in Dubai, Sydney, and Malaysia to create networks and sponsorships for women in fintech.
Direct listing of Indian Companies at IFSC GIFT City and its benefits
IFSCA chairperson K Rajaraman, in a report by Moneycontrol, announced that the direct listing of Indian companies at IFSC GIFT City will soon be approved with recommendations from SEBI (Security and Exchange Board of India) and RBI (Reserve Bank of India). Therefore, the government is prepared to make necessary amendments at a fast pace to ensure direct listing by the end of this year. Additionally, there are approximately 68 alternate investment funds launched by 78 existing fund managers in GIFT City. These funds have a target of about US$20 billion, out of which US$4 billion has already been committed and US$1 billion invested in India. These funds consist of venture capital funds, hedge funds, and private equity funds.
The benefit of engaging in trading activities in GIFT City is that all transactions are conducted in US dollars. This benefit is aimed at eliminating the necessity for foreign investors to bear additional expenses associated with currency conversion and hedging. As of September 2023, the monthly turnover on IFSC international stock exchanges reached a noteworthy US$67.3 billion. Another advantage is for non-resident investors, such that income generated from offshore investments routed through an Alternative Investment Fund (AIF) established in an IFSC is exempt from taxation. It underscores the legal distinction of the IFSC as a separate jurisdiction from the rest of India, exclusively offering financial services denominated in foreign currency.
Aircraft leasing at IFSC GIFT City
India is aiming to secure a share of aircraft leasing market, which is presently dominated by Ireland and China, through IFSC GIFT City. In a recent update, India’s Ministry of Corporate Affairs notified that specific provisions of the Insolvency and Bankruptcy Code (IBC) will no longer be applicable to aircraft, including their engines, airframes, and helicopters. This regulatory shift is poised to significantly impact the Indian aviation industry, simplifying the asset recovery process, particularly during airline insolvencies. Entities engaged in the financing and leasing of aircraft in India have calculated that the existing legal framework under the IBC poses obstacles to lessors in repossessing aircraft, resulting in an additional financial burden of approximately US$1.2-1.3 billion on Indian airlines. This regulatory adjustment is expected to alleviate such challenges and enhance the overall efficiency of the aircraft financing and leasing ecosystem in the country.
Indian leasing company ModAir Aviation has inducted six aircrafts through IFSC GIFT City to be used by flying training organisations. Additionally, Air India has become the first commercial airline to set up a leasing unit at IFSC Gift City. Under a financial lease with a project cost of US$8.7 billion, Air India’s six A350s that will be inducted into the Tata-owned airline’s fleet, will be through the leasing firm AI Fleet Services IFSC Limited at GIFT City. IndiGo, India’s top low-cost carrier, has also established a presence at IFSC Gift City for the financial leasing of aircraft. The company announced invest plans worth US$3.6 million. In February 2021, the International Financial Services Centre Authority (IFSCA) at GIFT City introduced a framework specifically for aircraft leasing within India. As of now, 22 leasing firms have initiated operations, facilitating the leasing of over 100 assets in the country.
Ship leasing through IFSC GIFT City
The successful leasing of the first ship from GIFT IFSC marks a significant milestone in India’s ship leasing landscape, indicative of the substantial growth and investment potential in the Indian maritime sector. IFSC GIFT City, according to industry experts, has the potential to be a premier destination for both domestic and international entities looking to capitalize on the abundant ship leasing and financing opportunities in India. Ripley Shipping India IFSC Private Ltd has achieved the distinction of being the inaugural company to lease a vessel from GIFT City. The company obtained a certificate of registration from the IFCSA in March 2023, allowing it to operate from the IFSC within GIFT City.
The first vessel leased is named MV Ripley Pride, it is a bulk carrier (Panamax) constructed in Japan in 2003, boasting a carrying capacity of approximately 76,858 deadweight tonnes (DWT). With a length overall of 225 meters and a width of 32.26 meters.
Social and entertainment infrastructure
According to Tapan Ray, Managing Director at GIFT City, steps are being taken for the creation of commercial, residential, and social infrastructure. On the societal front, there is the proposed development of a riverfront project. As the river Sabarmati is situated on the western bank of GIFT City, the GIFT City administration will create a riverfront that will ultimately connect to Ahmedabad, featuring riverfronts on both sides of the Sabarmati.
On the entertainment front, a world-class entertainment zone has been planned, which will be completed in three years. Other key projects are a central park and metro rail connectivity, to be set up by 2024. In terms of commercial infrastructure, the master plan of GIFT City has been extended to add another roughly 10 sq. km, GIFT City will now be spread across a 14 sq. km area. Out of the initially proposed 44 million square feet, a significant 22 million square feet has already been designated for commercial, residential, and social infrastructure purposes. Currently, 17 buildings are in the operational phase, with an additional 30 under active construction and 17 in the planning stages. This concerted effort is poised to result in the establishment of 64 high-rise buildings within GIFT City over the next five to seven years.
In the residential domain, 5,000 residential units have been successfully allocated, contributing to the fostering of a walk-to-work culture. This aligns with the vision of promoting a seamless walk-to-campus experience, even for university students. This strategic allocation ensures that residents, including students, can conveniently walk to their respective destinations within the vibrant GIFT City environment.
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