GIFT City’s tailwind for ship leasing
GANDHINAGAR : In just two years since ship leasing took off at GIFT City in Gujarat, the numbers are already turning heads. As of October, 27 registered ship-leasing entities are operating from the International Financial Services Centre (IFSC) at India’s first global finance enclave, and the number of vessels leased or purchased has more than doubled to 30 in the past year, with 16 ships purchased and 14 leased.
The shift is significant. Until recently, India had no dedicated platform for leasing ocean-going vessels. After Ripley Shipping India IFSC Pvt Ltd became the first entity to lease a bulk carrier in June 2023, GIFT IFSC is fast emerging as one of the few financial centres globally to host a comprehensive, regulator monitored ship-leasing regime. The services covered include financial leases, operating leases, hybrid structures and sale-and-leaseback transactions.
Today, bulk carriers account for 43 per cent of the ships leased or purchased from GIFT IFSC, with the value of assets leased rising to $1.47 billion, according to data shared by International Financial Services Authority (IFSCA), the unified regulatory in GIFT City.
In all, 13 bulk carriers, ranging from 75,500 DWT to 1,06,000 DWT, have been leased or purchased to date. The single largest vessel leased from the IFSC is a 1,50,000 DWT Suezmax crude oil carrier (34– to 38-month lease). Suezmax represents the maximum size of tanker that can transit the Suez Canal when fully loaded. Beyond bulkers, the fleet leased through GIFT includes six ethane gas carriers, five container ships, one medium-range product tanker, three LPG tankers and an additional tanker.
Relocation of finance
Of the 30 ships leased or purchased, 17 are Indian-flagged vessels; the foreign flags include Marshall Islands (six vessels), Panama (one), Portugal (one), and Singapore (five). For an industry long reliant on leasing structures in foreign jurisdictions, the shift marks a strategic relocation of maritime finance to Indian oversight, underscoring the fact that a ship’s flag is far more than symbolic — it determines its nationality, regulatory standards and the global jurisdictions under which it can operate legally and safely.
GIFT City, in comparison with ship leasing stalwarts such as Singapore or Europe, is still nascent. Its ship leasing activity is dwarfed by its aircraft leasing counterpart, with hundreds of aviation assets already on lease. As of September 30, as many as 37 aircraft-leasing entities have leased about 253 assets from GIFT IFSC, including 98 aircraft, 70 engines and 85 aircraft auxiliary power units. GIFT IFSC’s ability to host both aviation and maritime leasing under a unified regulatory authority is drawing attention from global financiers. “So far, nine ship-leasing entities have borrowed $71.1 million from financial institutions operating within GIFT City,” K Rajaraman, Chairperson, IFSCA, told businessline.
GIFT IFSC now offers the facility to create Indian-domiciled lessors operating under a globally aligned framework. This helps reduce reliance on offshore leasing centres while enabling competitive financing. The clarity and depth of the IFSCA framework are an added attraction. With prescribed capital requirements — from $2,00,000 for operating lease entities to $3 million for financial or hybrid activities — and permission to transact in freely convertible foreign currencies, GIFT offers a structure typical of mature global leasing hubs.
Challenges
But experts point to lingering hurdles. Surya Sreenivasan, Partner, Cyril Amarchand Mangaldas, said, “India is a closed registry and multiple stakeholders have indicated that the most attractive global shipping hubs offer shipowners the flexibility to flag their vessels with registries that are lighter on regulatory compliances. From a liquidity perspective, stakeholders are also keenly awaiting the notification of shipping as an infrastructure sub-sector to obtain the financing benefits that are currently provided to other capital-intensive sectors. Extended procedures and timelines for the creation and enforcement of mortgage have also been identified as an area of improvement.”
Amit Oza, Director, Astramar Shipping and Trading Services, concurs. “The key challenge is in streamlining the import process of Indian flag ships in IFSC. Rule 29b of SEZ Act requires ships to file bill of entry and shipping bill every time a ship is leased in or out of IFSC. This rule is fine for aircraft as that is a different business with long-term charters, but is a deal breaker for ship operators as they charter hundreds of ships a year on short-term charter. The rule should be amended for import only and the lease component should be deleted,” he said. He also called for clarity on ancillary services like ship-broking and ship management, activation of commodity trading and container leasing, and dedicated ship finance desks at banks and other capital providers.
The regulatory framework for ship lease was issued in 2021 and later modified to mandate that only lessors holding ownership or leasehold rights over a ship may engage in activities such as voyage charters and affreightment contracts. Further, there were restrictions on the transfer of vessels from India residents to IFSC entities solely to service Indian clients. However, lessors were permitted to acquire new ships from Indian shipyards. IFSC-based ship lessors are now permitted to share office space and personnel.