Aircraft Leasing From GIFT IFSC: The IFSCA Framework and India’s Cape Town Legislation

Aircraft leasing was the first non-banking business that GIFT IFSC set out to win, and the legal work required to make it possible illustrates how the IFSC framework is built: a Central Government notification to bring the activity inside the regulatory perimeter, an IFSCA framework to license it, and then, separately, a change in general Indian law to make creditor remedies work. The third element arrived in 2025 and 2026.

Step One: Aircraft Lease as a “Financial Product”

Aircraft leasing became a recognised financial product in GIFT IFSC through Central Government Notification S.O. 3652(E), dated 16 October 2020, under section 3(1)(d)(vi) of the IFSCA Act, 2019. The notification covered operating leases, financial leases and hybrid leases of aircraft, helicopters, engines and related parts.

The perimeter was then widened. Notification S.O. 5199(E) dated 14 December 2021 notified operating leases, including hybrids, of such products or equipment as IFSCA specifies. Using that power, IFSCA specified Aircraft Ground Support Equipment, being purpose-built mobile equipment for ground handling, servicing or field maintenance of aircraft on the ramp area and IATA-specified ground support equipment, together with equipment for ramp handling services as listed in the Airports Authority of India’s 2018 notification. Aviation training simulation devices were added in April 2023.

Step Two: The IFSCA Framework

The Framework for Aircraft Lease, issued by circular dated 18 May 2022 and updated to 26 February 2025, sets out how a lessor is licensed. It operates through the Finance Company Regulations (Article 17): an operating lease transaction for aircraft lease is a permitted non-core activity, while a financial lease, or a hybrid of financial and operating lease, is a permitted core activity.

Who may be a Lessor. An entity registered with IFSCA as a Finance Company or Finance Unit for aircraft leasing. The applicant must set up in the IFSC as a company or an LLP, with the promoters or holding structure located in a FATF-compliant jurisdiction. An IFSC entity that intends to undertake aircraft leasing only through wholly owned subsidiaries set up in the IFSC is itself deemed a Lessor.

What a Lessor may do. Operating leases of aircraft, ground support equipment and aviation training simulation devices; financial leases and hybrids; asset management support services for assets owned or leased out by the entity or its group entities; and sale and leaseback, purchase, novation, transfer and assignment transactions, together with other related activities approved by IFSCA.

Capital. A minimum owned fund of USD 200,000, or equivalent in freely convertible foreign currency, with power in IFSCA to require additional capital.

The Domestic-Asset Restriction

Clause O.2 of the framework, inserted and then amended in October 2024 and February 2025, addresses transactions with persons resident in India. A Lessor may not purchase, lease or otherwise acquire an asset covered by the framework from a person resident in India where, after the acquisition, the asset will be operated or used solely by persons resident in India, or to provide services to persons resident in India.

Three exceptions apply:

1. where the acquisition is from a person who is not a group entity of the Lessor;
2. where the acquisition is part of a sale and leaseback of assets being imported into India for the first time; and
3. where the asset is acquired from a manufacturer of the asset in India.

The policy is recognisable from elsewhere in the IFSC framework: the regime is not intended to be used to re-domicile purely domestic arrangements into the IFSC for concessional treatment, but genuine international transactions, including first-time imports on sale and leaseback, are expressly preserved.

Step Three: The Cape Town Legislation

India acceded to the Cape Town Convention and the Aircraft Protocol in 2008, but until recently the treaty was not implemented by primary legislation, which created uncertainty about creditor remedies when they collided with Indian law. The Protection of Interests in Aircraft Objects Act, 2025, passed by Parliament in April 2025 and assented on 16 April 2025, implements the Convention and Protocol.

The Protection of Interests in Aircraft Objects Rules, 2026 were notified by the Ministry of Civil Aviation by G.S.R. 77(E) dated 30 January 2026, and came into force on publication. Their principal features are:

• the DGCA as registry authority, maintaining an electronic Information System structured aircraft-object by aircraft-object (rule 5);
• an obligation on debtors to inform the DGCA of international interests within thirty days of an aircraft object’s registration in India, with six months from commencement for interests existing on that date (rule 6);
• quarterly electronic reporting of specified Appendix A dues — airport operator charges, route navigation and facilitation charges, terminal navigation landing charges, fuel charges as a public service, and GST on the leasing or financing — by the fifth day of the month following each quarter (rule 7);
• a requirement that a creditor notify the DGCA of a default in Form III before exercising any remedy (rule 9, reflecting section 5(2) of the Act);
• a two calendar month “waiting period” running from the insolvency commencement date, after which no Convention or Protocol remedy may be prevented or restricted (rule 11); and
• settlement by the IDERA holder of Appendix A dues arising after the default notification before export (rule 14).

For a GIFT IFSC lessor, this legislation is as important as the IFSCA framework. The framework determines whether the lessor may exist and what it may do; the Cape Town legislation determines what happens when a lessee defaults (Article 42).

Putting the Three Layers Together

Points for Lessors to Confirm

• Classify the lease. Operating and financial leases sit in different activity categories under the Finance Company Regulations, which affects capital and prudential treatment.
• Test clause O.2 at the asset level, not the portfolio level, and document which exception is relied on.
• Diarise the Cape Town compliance steps, including debtor intimation timelines and quarterly dues reporting, which fall on operators but affect a creditor’s ability to enforce.
• Check the tax conditions, several of which are keyed to commencement of operations by 31 March 2030.

Update to 15 October 2026

On 13 August 2026 IFSCA issued a consultation on a consolidated framework for leasing activity in the IFSC. Until a final framework is issued, the circulars discussed in this article remain the operative text. Any final framework should be checked for changes to the leasing entity’s eligibility, owned-fund and permissible-activity conditions. Comments closed on 2 September 2026 and, as at 15 October 2026, no final framework had been issued. A separate consultation of 18 August 2026 proposes to enable the operating lease (including hybrids of operating and financial lease) of GPUs and connected data-centre equipment as a financial product.

Frequently Asked Questions

1. What is aircraft leasing in GIFT IFSC?

Aircraft leasing in GIFT IFSC is a regulated activity that allows eligible entities to undertake operating leases, financial leases and related aviation asset transactions under the IFSCA framework.

2. Which regulations govern aircraft leasing in GIFT IFSC?

Aircraft leasing is governed by the IFSCA (Finance Company) Regulations, 2021, the Framework for Aircraft Lease, and applicable Central Government notifications.

3. What is the minimum capital requirement for an aircraft lessor in GIFT IFSC?

An aircraft lessor must maintain a minimum owned fund of USD 200,000 or its equivalent in freely convertible foreign currency, subject to IFSCA’s power to require additional capital.

4. What is the Cape Town Convention’s significance for aircraft lessors?

The Protection of Interests in Aircraft Objects Act, 2025, and the Rules, 2026, establish a legal framework for international interests in aircraft objects and creditor remedies following default.

5. Can a GIFT IFSC aircraft lessor acquire assets from Indian residents?

Yes, subject to the domestic-asset restriction under clause O.2 of the Framework for Aircraft Lease and its specified exceptions.