26 February 2025
IFSCA has issued amendment to the ‘Framework for Aircraft Lease’ specifically addressing transactions with individuals or entities residing in India vide circular dated 26 Feb 2025. The circular modifies Clause O.2 of the Aircraft Lease (AL) framework. Previously, lessors in IFSC were generally restricted from acquiring assets (like aircraft) that would be solely operated or used by Indian residents or to provide services to Indian residents. The amendment introduces certain exceptions to this restriction.
EXCEPTIONS TO THE RESTRICTIONS :
The restriction on acquiring assets solely for use by Indian residents does not apply in the following situations:
🔅 The lessor acquires the asset from an Indian resident who is not a ‘Group Entity’ of the lessor.
🔅 The acquisition is part of a sale and leaseback arrangement where the assets are being imported into India for the first time.
🔅 The asset is acquired by the lessor directly from a manufacturer of the asset in India.
IMPACT ON AIRCRAFT LEASING TRANSCTIONS IN GIFT CITY
The amendment is designed to facilitate aircraft transactions in GIFT City, specifically related to:
✔️ Supporting Indian Aircraft Manufacturers: This allows lessors in GIFT City to purchase aircraft directly from manufacturers located in India, fostering domestic manufacturing and potentially boosting the Indian aviation industry.
✔️ Facilitating Import and Leaseback: The clarification on sale and leaseback arrangements for newly imported aircraft should encourage airlines in India to use IFSC-based lessors for their financing needs when acquiring new aircraft. This could reduce reliance on foreign lessors.
✔️ Broadening Transaction Scope: By allowing transactions with non-group Indian residents, the circular opens the door to a wider range of leasing arrangements, potentially increasing the volume of aircraft leasing activity within GIFT City.
✔️ Overall: The changes aim to make GIFT City a more attractive and competitive hub for aircraft leasing and financing, supporting the growth of both the Indian aviation sector and the financial services industry within the IFSC.
In essence, the IFSCA is removing hurdles for IFSC-based lessors to engage in specific types of transactions involving Indian entities, particularly those that benefit Indian manufacturing and the import of new aircraft into the country.
