Aviation leasing and financing ecosystem at GIFT IFSC, India

This report provides an overview on the current situation of commercial aircraft leasing in India, and the future scope of leasing. It highlights the significant potential for growth in this sector and underscores the importance of developing a robust leasing framework to support the explosive growth in India’s aviation industry.

The report provides an understanding of India’s overall macro-economic growth in the past decade along with an evolving business ecosystem. It also covers how infrastructure and aviation are critical for achieving India’s Viksit Bharat Vision of 2047.

Further, the report introduces the reader to the Indian aviation market. It highlights the growth of the aviation industry in India in past decade, its outlook, and envisaged growth in line with India’s Viksit Bharat Vision @ 2047. It also introduces the reader to the leasing environment and role of GIFT International Financial Service Centre (IFSC) in India.

Subsequently, the report deep dives into GIFT IFSC, covering its vision and the journey so far. It encapsulates a detailed understanding about the business opportunities and innovative financial products and services available at GIFT IFSC along with the key business highlights.

Additionally, it provides an overview of the jurisdictional comparison followed by a deep dive into the aircraft leasing opportunities available at GIFT IFSC. It also gives an overview on the leasing journey so far, followed by a brief on the regulatory framework, key enablers for aircraft leasing at GIFT IFSC. It further covers potential tax benefits of the GIFT IFSC related to direct tax, indirect tax and other incentives.

Summary and way forward

With the government's focus on holistic and balanced growth across India, the country is expected to achieve a CAGR of 7-9 per cent in air passenger traffic over the next two decades, indicating a promising future. This trend is mirrored by Indian carriers such as IndiGo and Air India, which are placing record orders to meet passenger demand. Consequently, the aircraft fleet is expected to grow at a CAGR of 6.0-6.3 per cent, primarily driven by wide-body aircraft

Given the substantial investment required for aircraft, the industry is increasingly shifting towards leasing rather than owning aircraft. This approach offers benefits such as maintaining asset-light financials, flexibility in adjusting capacity based on demand, and reduced operational costs. Establishing leasing infrastructure in India will not only bolster the aviation industry but also contribute to the country's economic growth

The IFSC at GIFT City is a strategic initiative by the government to support the leasing industry in India. The IFSC provides access to global financial markets and currencies, enabling airlines and aviation-related businesses to raise capital from international investors. Additionally, the IFSC offers a robust regulatory framework and tax incentives for aircraft leasing and financing, allowing airlines to procure aircraft at competitive rates and reducing their financial burden

While the IFSC at GIFT City is a commendable initiative by the government to attract lessors to India and considerable grounds have been covered in last few years, there are aspects that need to be addressed to position India as a competitive player in the industry. GIFT City must continue to evolve its regulatory framework, tax incentives, address financing challenges, and facilitate ease of doing business to develop the aircraft leasing and financing ecosystem in GIFT IFSC

In addition to providing a robust regulatory framework for the smooth functioning of the aircraft leasing industry at the IFSC, it also offers numerous tax benefits to incentivize participation. These incentives include, but are not limited to, deductions and exemptions on income, capital gains, and dividend payable. Furthermore, the introduction of the Protection of Interests in Aircraft Objects Bill aims to enhance legal protection for lessors by addressing concerns about aircraft repossession during airline insolvencies. The bill establishes a legal framework that ensures lessors can promptly reclaim their aircraft if an airline defaults on lease payments or goes bankrupt. By offering these protections, the bill aims to make GIFT City an attractive hub for international lessors, thereby supporting the growth of the aircraft leasing industry in India