To quote India's civil aviation minister: "By positioning India as a competitive aircraft leasing hub, GIFT City is unlocking a USD 5 billion annual opportunity-reducing leasing costs by 10-15%, enabling nearly 80% of our fleet to operate on lease, and driving India's emergence as a global aviation financing centre."
Approximately 85% of Indian airline fleets are leased from global leasing hubs such as Ireland and Singapore. This leasing model enables airlines to circumvent substantial upfront capital expenditures, maintain liquidity for core operational needs, and strategically expand their fleets without incurring significant debt burdens.
While leasing offers clear advantages to airlines, it is also a high-margin business for lessors. Despite being capital-intensive, aircraft leasing firms typically procure aircraft directly from manufacturers such as Airbus and Boeing at substantial discounts, facilitated by bulk purchasing. These aircraft are then leased to airlines under operating or financial lease agreements-typically spanning 8 to 12 years-thereby generating stable, long-term rental income. Moreover, given the extended lifespan of commercial aircraft, lessors retain the flexibility to re-lease them to other operators upon the termination of an existing lease, ensuring continued asset utilization and revenue generation.
With most Indian airlines are currently leasing aircraft from overseas, establishing a local leasing ecosystem would help reduce India's dependence on foreign lessors, control the outflow of foreign exchange and create jobs. Recognizing this, India decided to enter the aircraft financing and leasing space through the GIFT City IFSC (Gujarat International Finance Tec-City), a regulatory and tax-advantaged zone aimed at building India's own leasing ecosystem.
Framework for Aircraft Leasing from GIFT City
|
Permissible Activities |
Capital Requirement |
|
Operating and finance lease for aircraft, sale and lease back, purchase, novation, transfer, assignment, and other similar transactions in relation to aircraft lease Lease of aircraft engines Asset Management of owned and leased fleet |
Minimum owned funds of USD 200,000 or equivalent foreign currency for operating lease Minimum owned funds of USD 3,000,000 or equivalent foreign currency for finance lease |
Tax Advantages
- Tax holiday for any consecutive 10 years out of the first 15 years of operation.
- Exemption from capital gains tax on aircraft sales during the tax holiday period, and similar exemptions for non-residents selling shares in special purpose vehicles (SPVs).
- No minimum alternate tax for those opting for the new tax regime.
- Tax exemptions on royalty and interest income for non-resident lessors leasing to GIFT City units.
- Waiver on customs duty for aircraft imports.
- Waiver on stamp duty relating to set up of the unit and property acquisition.
Progress so far
- Around 33 aircraft lessors have registered in GIFT City
- Over 125 aviation assets have been leased from GIFT IFSC
- Leasing transactions executed for wide body aircraft, narrow body aircraft, turbo props commercial jets (ATRs), rotary wing (helicopters) and business jets
Repossession of aircraft - No more a nightmare
The Protection of Interests in Aircraft Objects Act, 2025 ("Act") came into force in India in May 2025. The Act implements the Cape Town Convention on International Interests in Mobile Equipment ("Cape Town Convention") and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment ("Protocol").
This Act comes in response to the insolvency cases of Jet Airways and Go First Airlines. The aircraft lessors to the insolvent airlines faced difficulty in repossessing and deregistering their aircraft in India due to a mandatory moratorium period imposed by the Indian Insolvency and Bankruptcy Code, 2016 ("IBC"). The IBC applied to corporate insolvencies across all sectors and did not contain any carve outs for aviation assets despite India acceding to the Cape Town Convention. The Act now bestows rights on the lessors to repossess their aircraft as well as deregister them quickly in case of any default by the airline lessee. The Act has overriding effect in case of inconsistency with any other India law such as IBC.
These reforms indicate that the regulatory framework in India has sufficiently matured to support a thriving aircraft leasing and financing market in GIFT City.
The future
GIFT City combines strategic regulatory incentives, tax advantages, and proximity to one of the world's fastest-growing aviation markets. The potential for GIFT City to be a global leasing hub is real. The framework, tax incentives and regulatory reforms are all in place. The only thing that is still needed is low-cost, reliable financing. Leasing companies across the world survive on the support of domestic financial institutions. However, Indian banks have been wary of aviation exposure because of their past experiences with failed Indian airlines. However, this reluctance of the Indian banks is gradually reducing and with strong government support and a rapidly developing financial ecosystem, India is likely to become a successful hub for aircraft leasing soon.
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