Policy Update
Devyani Choudhary
Background
The Government of India has promulgated the Aircraft Leasing and Financing Policy (2021) to position India, especially GIFT City (Gujarat International Finance Tec-City), as an aircraft leasing global hub. This was prompted by the realization that more than 80% of India’s fleet of aircraft was leased from outside the country, leading to a huge foreign exchange outflow and exposure to foreign jurisdictions in terms of law, such as Ireland and Singapore.
In response to this, the International Financial Services Centres Authority (IFSCA)(set up in 2020) initiated a framework to enable aircraft leasing through GIFT IFSC. Aircraft leasing activities were officially designated as “financial products” under the IFSCA Act through an October 2021 notification. This was extended in December 2021 and reaffirmed in subsequent circulars (IFSCA official site).
The fundamental aims of the policy are to decrease India’s dependence on overseas leasing companies, keep aviation financing in Indian jurisdictions, places GIFT IFSC on a level playing field as a competing international financial institution and hub and lastly be consistent with international regimes such as the cape town convection.Way contributors are Indian airlines, lessors incorporated within GIFT IFSC, aviation support services providers, investors, and training providers.
Functioning
Functionally, leasing companies have to register in GIFT IFSC as finance companies or units with required capital (USD 200,000–3 million, depending on lease category). They can have multiple models of leases—operating, financial, and hybrid—and cover not only aircraft but also engines, simulators, and ground support equipment. The legal infrastructure enables lessors to recover assets in the event of default, with safeguards fortified by the Cape Town Convention and new Protection and Enforcement of Interests in Aircraft Objects (PIAO) Act, 2025 (PIB, KPMG Report).
The policy is supported by significant tax benefits: 10-year tax holiday, exemptions from capital gains, no GST or stamp duty, and lower taxation on dividends and interest. Regulatory easing also facilitates the import/export of aircraft components and streamlined customs clearance.
Though promising, the policy is encountering a few issues such as Limited availability of credit and financing for lessors, Domestically imposed restrictions on stock exchange listings,Legal risk of enforcement despite compliance in Cape Town
Performance
India’s Aircraft Leasing and Financing Policy, launched in 2021, set out with a bold goal: to stop relying so heavily on foreign companies for aircraft leases and to bring that business home to GIFT City, Gujarat. In just a few years, we’re starting to see the early signs of that vision taking shape.Between 2022 and 2024, around 33 leasing companies registered at GIFT IFSC under this policy.
Out of these, 10 to 11 of them already have active lease contracts, indicating that it’s not just on paper they’re actually taking place on the ground. Industry stalwarts such as AI Fleet Services (leasing subsidiary of Air India) have already taken the lead by leasing out aircraft and even pilot training equipment from India.
Figure1: Aviation Assets Leased from GIFT IFSC (2022 to 2024)
Source: Ministry of Civil Aviation, The Hindu BusinessLine, Moneycontrol (2022–2024)
By as early as February 2024, over 200 aviation assets were leased from GIFT IFSC. That comprises nearly 39 aircraft, 63 engines, 56 ground support units, and even 9 helicopters. Together, the overall value of these transactions has already reached USD 1 billion. For a new policy and a young financial hub, that’s quite a milestone.
Also heartening is the spike in credit flow via GIFT’s International Banking Units (IBUs). Between January and March 2024, the credit deployed went from USD 235 million to USD 384 million, an increase of almost 63 percent. That indicates banks and financiers are starting to have faith in the system and believe in the potential of Indian aircraft leasing.
Why is this so crucial? Because Indian airlines depend so much on leasing. Perhaps as much as 86 percent of the nation’s 837 aircraft fleet is on lease. Most of that business has, until recently, been conducted overseas, losing us in excess of USD 5 billion every year in foreign exchange. This policy is India’s effort to bring some of that value back to the country, and gradually, it’s beginning to bear fruit.
But it’s not completely plain sailing. Most registered leasing companies remain dormant. Indian banks have been in no hurry to lend, perhaps because aircraft leasing remains perceived as a high-risk or unknown environment. And firms at GIFT can’t yet raise capital on India’s flagship stock exchanges, which hampers their ability to scale rapidly.
That aside, matters are looking up. In 2025, India enacted the Protection and Enforcement of Interests in Aircraft Objects (PIAO) Act, which provides stronger legal recourse for lessors in case things fail to go their way. It also aligns India with international standards under the Cape Town Convention.
In brief, though the policy hasn’t yet taken off fully, it’s very much on the cards. The increase in asset leases and finance indicates the groundwork is solid. With a little more encouragement, particularly from banks and capital markets, GIFT IFSC could become a major player in the international aircraft leasing business very soon.
Impact
The 2021 Aircraft Leasing and Financing Policy was a positive move towards decreasing India’s dependence on foreign lessors and making the country an international aviation finance hub. Within three years, the policy has begun reaping tangible benefits, especially through the developments in GIFT IFSC in Gujarat.
As of early 2024, there are over 33 leasing players that have registered at GIFT City, with 10-11 actively facilitating lease transactions. These range from commercial aircraft as well as allied aviation assets such as engines and ground support equipment. Overall, there have been more than 200 aviation assets leased and the total value of all these transactions has reached more than USD 1 billion. This is a significant beginning in establishing a local leasing ecosystem.
One of the most significant developments has been the enactment of the Protection of Interests in Aircraft Objects (PIAO) Bill, 2025. It brings India’s legal system in line with the Cape Town Convention, which greatly enhances the protection of lessors. With more stable legal results, leasing fees are expected to decline by 8–10%, creating advantages not only for financiers but also for Indian airlines and passengers.
Emerging issues
All that aside, the journey of the policy so far has not been an easy one. Several registered leasing entities have still not become operational, mainly because of challenges in arranging funding. Indian banks have been hesitant to lend in this segment, and the majority of functioning deals have been taken care of using internal resources or overseas credit lines. The regulatory environment also continues to feel piecemeal, with approvals getting delayed on account of coordination between IFSCA, DGCA, Customs, and other agencies.
There is also unease regarding the existing tax holiday, which is for a mere 10 of the first 15 years of operations—while aircraft leases last for anywhere between 20 years and more. Clarity is also necessary on how existing abroad-held leases can be converted into the GIFT IFSC mechanism.
Way Forward
To carry this initial momentum forward, the next step needs to be on increasing the depth of financial access, particularly through motivating Indian banks to play a role here. Minimizing regulatory processes through a single window will be a big step in ensuring reduced timelines. While doing this, extending the tax incentives to match lease lifecycles and simplifying transition rules will increase confidence levels among investors.
With good legal foundations now established, and a policy vision aligned with India’s overall aviation expansion, the Aircraft Leasing and Financing Policy has genuine potential. The challenge is not only to meet India’s aviation demand, but to become a regional hub in the future.
References
- Press Information Bureau (PIB). (2021, February 1). The Finance Minister proposes to make GIFT-IFSC a global aircraft financing & leasing hub. Press Information Bureau, Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1701163
- International Financial Services Centres Authority (IFSCA). (n.d.). Aircraft Leasing. https://ifsca.gov.in/Pages/Contents/Aircraft_Leasing
- IFSCA. (2025, March 4). Revised framework on aircraft lease. https://www.ifsca.gov.in/Document/Developments/revised-framework-on-aircraft-lease_new_final04032025100638.pdf
- International Air Transport Association (IATA). (n.d.). Aircraft leasing. https://www.iata.org/en/programs/ops-infra/techops/aircraft-leasing/
- PwC India. (2021). Aircraft leasing in GIFT IFSC: Unlocking the potential. https://www.pwc.in/assets/pdfs/aircraft-leasing-in-gift-ifsc.pdf
About the Author: Devyani Choudhary is a research intern at IMPRI and currently pursuing BSc Economics honors at Symbiosis School of Economics. Her academic and research interests include finance, public policy analysis, and tax law, with a focus on their socioeconomic impacts.
Acknowledgement: The author sincerely thanks Aasthaba Jadeja and IMPRI fellows for their valuable contribution.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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