Whalesbook
India is moving to capture a substantial share of the $187 billion global aviation leasing market. The nation is building Gujarat International Finance Tec-City (GIFT City) into a competitive onshore hub, introducing special leasing companies (SPVs) designed for asset protection and generous tax incentives. This strategy aims to address past lessor concerns and challenge the dominance of offshore centers like Ireland, Singapore, and Hong Kong.
SPVs and Tax Incentives Attract Lessors
Central to India's strategy are special SPVs within GIFT City designed to protect leased aircraft and ensure a smoother recovery for lessors if an airline faces financial trouble. This approach tackles the key challenge of aircraft repossession that has troubled foreign lessors in India. India is also making GIFT City more attractive by extending tax holidays for aircraft leasing firms to 15 years, up from the current 10-year waiver. These benefits, combined with exemptions from customs duties and GST on aircraft leases, aim to significantly cut operational costs, potentially reducing lease rates by 8-10% for Indian airlines.
Addressing Repossession Risks and Legal Gaps
These reforms gained urgency from difficult past experiences, especially the Go First Airlines insolvency. The Go First crisis saw lessors face lengthy legal battles and major delays in repossessing aircraft due to Insolvency and Bankruptcy Code (IBC) moratoriums, highlighting weaknesses in India's legal system. Before these changes, India's adherence to the Cape Town Convention (CTC) was incomplete, creating a gap between its laws and international creditor protections. The recent Protection of Interests in Aircraft Objects Bill, 2025 (CTC Act), passed in April 2025, and an October 2023 notification stating CTC-covered assets are exempt from IBC moratoriums, aim to fix these issues. These laws formalize lessor rights and speed up repossessions, bringing India in line with global standards and boosting investor confidence.
Fueling Sector Growth and Competing Globally
India's aviation market is set for major growth, expected to become the world's third-largest domestic market by 2030. This growth will require substantial financing, as over 80% of India's commercial planes are currently leased. GIFT City's strong tax and regulatory framework, featuring a single point of approval and allowing 100% foreign ownership, aims to capture more of this market. The goal is to replicate Ireland's success, which handles about half of the world's leased aircraft. Currently, 38 lessors operate in GIFT City, having leased 370 assets worth $5.8 billion as of December 2025. Success will hinge on competing with established hubs and drawing estimated annual capital flows of $5-10 billion.
Lingering Concerns: Enforcement and Clarity
Despite new laws, lessors remain cautious. A key worry is how effectively these new rules will be applied in practice. While the CTC Act and notifications offer a clearer legal route, bureaucratic delays and how courts interpret the laws could still cause issues. Lessors are watching closely to see how these rules work in practice, especially compared to smoother repossession in places like Ireland and Singapore. Past issues, like those with Kingfisher Airlines and Jet Airways, linger. Any sign of weak enforcement could raise risk premiums for Indian airlines, slowing the sector's growth. Also, the true bankruptcy-remote nature of SPVs will be tested in future insolvency cases.
Outlook: Becoming a Global Aviation Finance Player
India's push via GIFT City, backed by legal reforms and tax incentives, clearly signals its intent to become a major global aviation finance player. The reforms aim to attract foreign capital, lower financing costs for domestic carriers, and build a stronger aviation sector. If executed well, these moves could make India a dominant leasing hub in Asia and a strong global competitor, impacting lease rates and aircraft availability. India's aviation market is projected to reach $45.6 billion by 2034, highlighting the huge opportunity, if lessor confidence is fully restored through reliable legal outcomes.