14 Jul, 2023
GIFT City, or Gujarat International Finance Tec-City, is India’s first operational greenfield smart city and international financial services centre. It is located in Gandhinagar district in Gujarat, and it offers a range of financial services and products to domestic and foreign investors. GIFT City aims to be a global hub for financial and technology businesses, providing world-class infrastructure, regulations, policies, and services.
GIFT City is a visionary project that was conceptualised by Prime Minister Narendra Modi in 2007, when he was the Chief Minister of Gujarat. The project was launched in 2015 and has been making rapid progress since then. The project area under development can be classified under the SEZ (Special Economic Zone) area and the Non-SEZ area (also known as the Domestic Tariff Area or the DTA). The SEZ area houses India’s first International Financial Services Centre (IFSC), which enables bringing back the financial services and transactions that are currently carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of financial institutions to India. The DTA area caters to various sectors and themes, such as banking, maritime cluster, finance, insurance, IT & ITES, engineering, fintech, automobiles, capital market, pharmaceuticals, bio tech, etc.
In this article, we will explore the current status and the future plans of GIFT City, as well as some of the challenges and opportunities involved.
According to the official website of GIFT City, as of June 2023, it is home to 23 multi-national banks, 35 fintech entities, two international stock exchanges with average daily trading volumes of $30.6 billion, as well as India’s first international bullion exchange with 75 onboarded jewellers. The city has also attracted investments from leading corporates and developers, such as HSBC, IBM, Bank of America, Standard Chartered, Oracle, Hiranandani, Sobha, Brigade, JNS, Lilavavati, Savvy, etc.
The city has also implemented various first-in-the-country initiatives in the field of urban infrastructure. Some of these are:
Utility tunnel: A 12 km long underground tunnel that carries all the utilities such as power cables, water pipes, drainage pipes, telecom cables etc. This eliminates the need for digging roads for maintenance and repairs.
City Command & Control Center (C4): A state-of-the-art facility that monitors and manages all the city operations such as traffic management, security surveillance, disaster management etc.
District cooling system: A centralised cooling system that provides chilled water to all the buildings in the city through a network of pipes. This reduces the energy consumption and carbon footprint of the city.
Smart water infrastructure: A smart water management system that ensures 24/7 water supply with minimum wastage and leakage. The system also recycles wastewater for non-potable uses such as landscaping and flushing.
Power infrastructure: A reliable power supply system that ensures uninterrupted power supply with minimum transmission losses. The system also uses renewable energy sources such as solar power to meet part of the city’s energy demand.
Automated waste management: An automated waste collection and transportation system that uses pneumatic tubes to collect waste from buildings and transport it to a centralised waste processing plant. This eliminates the need for manual handling and disposal of waste.
The Economic Survey 2022-23 noted GIFT City as a “path-breaking financial reform” as it emerges as a preferred jurisdiction for International Financial Services (IFS). The Union Budget 2023 also announced several plans to boost the growth and development of GIFT City. Some of these are:
Delegating powers under the SEZ Act to avoid dual regulation
Setting up a single window IT system for registration and approval of IFSCA (International Financial Services Centres Authority), SEZ authorities (Special Economic Zone Authority), GSTN (Goods & Services Tax Network), RBI (Reserve Bank of India), SEBI (Securities & Exchange Board of India), IRDAI (Insurance Regulatory & Development Authority)
Permitting acquisition financing by IFSC banking units of foreign banks
Establishing a subsidiary Exim Bank for trade refinancing
Amending the IFSCA Act for statutory provisions for arbitration and ancillary services
Recognising derivative instruments as valid contracts
According to a report by The Times of India, the state government plans to expand GIFT City by adding another 2,300 acres of land to the existing 886 acres. The additional land will be a combination of state-owned land and privately held land parcels, which will be soon notified by the state government. The state government plans to develop the expanse as GIFT Global City, a leg-up from its current identity of GIFT Smart City. The GIFT Global City will aim to attract more global businesses and investors to the city.
The GIFT City’s plan is for the 359 hectares (886 acres) of land area to have approximately 110 buildings with 62,000,000 sq ft of built-up area, of which around 67% is commercial, 22% is for residential and 11% is social facilities6. Currently, 2,000,000 sq ft of commercial space is operational, and another 3,000,000 sq ft is under development. The first phase had targeted to provide 30,000 jobs.
In the second phase, a total of 20 million square feet of development is planned for which GIFT City is expected to spend over Rs 4,000 crore in development of infrastructure. The second phase will also focus on developing more residential and social facilities to accommodate the growing population and workforce in the city. The second phase is expected to create another 50,000 jobs.
In the future, there are plans for GIFT City to become a global financial centre with a world-class business environment. It will also deal with the challenges and opportunities of a rapidly growing and future-ready economy. It will also be a centre of excellence for management and information technology (IT). It will offer new ways to learn and train domestic and foreign professionals.
While GIFT City has achieved remarkable progress and success in the past few years, it also faces some challenges and risks that need to be addressed and overcome. Some of these are:
Regulatory uncertainty: Although GIFT City operates under a separate jurisdiction with its own regulations and policies, it is still subject to the overall supervision and oversight of the Indian authorities. This means that there could be changes or amendments in the rules and norms governing GIFT City that could affect its operations and attractiveness. For instance, the Reserve Bank of India (RBI) recently issued guidelines on remittance limits and reporting requirements for resident individuals investing in GIFT City.
Operational complexity: Investing in GIFT City involves dealing with multiple entities and intermediaries, such as banks, brokers, custodians, fund managers, etc. This could increase the operational complexity and costs for investors. Moreover, investors need to comply with various documentation and KYC norms for opening accounts and transacting in GIFT City.
Market volatility: Investing in global markets and instruments exposes investors to higher market volatility and currency fluctuations. This could affect their returns and capital preservation. Moreover, investors need to be aware of the geopolitical risks and macroeconomic factors that could impact the performance of their investments.
Fund manager expertise: Investing in international PMS schemes requires a high level of trust and confidence in the fund manager’s expertise and track record. Investors need to check the fund manager’s credentials, experience, strategy, performance, fees, and reputation before investing in their schemes. Investors also need to monitor their portfolio regularly and communicate with their fund manager frequently.
On the other hand, GIFT City also offers some unique opportunities and advantages that make it an attractive destination for investors and businesses. Some of these are:
Tax incentives: GIFT City offers tax incentives and holidays to service providers and investors. For instance, GIFT City allows investors to select any 10 years out of a block of 15 years for tax exemption on capital gains and interest income. It also exempts service providers from income tax for the first 10 years of operation. Moreover, GIFT City does not levy any stamp duty, securities transaction tax, or goods and services tax on transactions.
Regulatory flexibility: GIFT City offers regulatory flexibility and ease of doing business to its participants. It has a single-window clearance system for registration and approval of various authorities. It also has a unified regulator, IFSCA (International Financial Services Centres Authority), which regulates all financial services activities in GIFT City.
Access to global markets: GIFT City enables access to global markets and instruments without any restrictions or limitations imposed by the Indian regulatory framework. It allows investors to trade in various financial instruments in foreign currencies, such as equities, mutual funds, exchange traded funds, index funds, currencies, commodities, bonds (Indian and global), etc. It also allows investors to invest in unapproved depository receipts (UDRs) that enable them to buy shares of top US companies.
Variety of products and services: GIFT City offers a variety of products and services for different risk profiles, return expectations, and investment objectives. These include alternate investment funds (AIFs), structured products, derivative products, portfolio management services (PMSes)
These include alternate investment funds (AIFs), structured products, derivative products, portfolio management services (PMSes), etc. These products and services are offered by reputed and experienced fund managers and service providers who have set up shop in GIFT City.
GIFT City is a visionary and ambitious project that aims to transform Gujarat and India into a global financial and technology hub. It is a smart city that offers world-class infrastructure, regulations, policies, and services to its participants. It is also a tax haven that offers tax incentives and holidays to its investors and service providers. It is also a gateway to global markets and instruments that enables access to various financial products and services in foreign currencies.
However, GIFT City is also a work in progress that faces some challenges and risks that need to be addressed and overcome. It is also subject to the overall supervision and oversight of the Indian authorities that could affect its operations and attractiveness. It is also exposed to market volatility and currency fluctuations that could affect its returns and capital preservation. It is also dependent on the fund manager expertise and track record that could affect its performance and reputation.
Therefore, investors and businesses need to do their due diligence, consult their financial advisors, and understand their risk appetite before investing or operating in GIFT City. They also need to monitor their portfolio regularly and communicate with their fund managers frequently.
Here are some of the frequently asked questions about GIFT City:
A: There is no definitive answer to this question as GIFT City is an ongoing project that will continue to evolve and expand over time. However, according to the official website of GIFT City, the first phase of the project, which covers 359 hectares (886 acres) of land area, is expected to be completed by 2025. The second phase of the project, which covers 20 million square feet of development, is expected to be completed by 2030. The state government also plans to add another 2,300 acres of land to the existing area, which will be developed as GIFT Global City.
A: You can invest in GIFT City through various intermediaries and service providers, such as banks, brokers, custodians, fund managers, etc. You need to open an account with them and comply with the KYC and documentation norms. You also need to adhere to the RBI guidelines on remittance limits and reporting requirements.
A: Investing in GIFT City offers tax benefits to investors and service providers. Investors can choose any 10 years out of a block of 15 years for tax exemption on capital gains and interest income. Service providers are exempt from income tax for the first 10 years of operation. There is no stamp duty, securities transaction tax, or goods and services tax on transactions in GIFT City.
A: Investing in GIFT City involves some risks, such as regulatory uncertainty, operational complexity, market volatility, and fund manager expertise. Investors need to be aware of these risks and take appropriate measures to mitigate them. Investors also need to diversify their portfolio and monitor their performance regularly.
I hope this article helps you understand more about when will GIFT City be completed. If you have any questions or feedback, please feel free to connect with us. Thank you for reading! 😊