Can India Become Asia’s Aviation Finance & Insurance Hub?
India is rapidly positioning itself as a global hub for aircraft and engine leasing, driven by the growth of its commercial fleet (projected to reach 1,100 by 2027 and 2,250 aircraft by 2035). Historically, Indian airlines relied heavily on offshore leasing hubs like Dublin (Ireland) and Singapore, leading to significant foreign exchange outflows. To capture this $50 billion opportunity domestically and power rapid growth, India has made massive strides in establishing Gujarat International Finance Tec-City (GIFT City) International Financial Services Centre (IFSC) as a competitive leasing hub.
Bharatiya Vayuyan Adhiniyam, 2024 replaced the colonial-era Aircraft Act, 1934 and came into force 1 January 2025. It modernizes India’s civil aviation framework, which extends to all of India and applies to Indian citizens and Indian-registered aircraft worldwide, as well as foreign aircraft while in Indian airspace sector. It aligns domestic rules with global standards and International Civil Aviation Organization (ICAO) rules.
The landmark enactment of Protection of Interests in Aircraft Objects (PIAO) Act, 2025 is a major reform that modernizes India’s aviation finance regime by aligning India’s legal framework with the Convention on International Interests in Mobile Equipment, 2001 (“Cape Town Convention”) and its Protocol on Matters Specific to Aircraft Equipment, 2001 (“Aircraft Protocol”), which India acceded to in 2008 and by addressing critical critical lessor insolvency concerns and risks.
To enable rapid scaling of the Aviation sector complementary measures such as a dedicated engine registry for engines and deeper domestic rupee-denominated financing are essential. The Protection of Interests in Aircraft Objects Rules, 2026 (“the Rules”), as notified by the Ministry of Civil Aviation, made under the Protection of Interests in Aircraft Objects Act, 2025 (“PIAO Act”), implement the Act’s provisions; the Act received Presidential assent on 16 April 2025 and came into force on May 1, 2025.
I. The Protection of Interests in Aircraft Objects (PIAO) Act, 2025 lowers lease pricing for Indian airlines by directly addressing and mitigating jurisdictional risk for international lessors:
i) Cape Town Convention Alignment: Historically, India signed the Cape Town Convention (“CTC”) in 2008 but lacked domestic legislation to enforce it. The PIAO Act, 2025 gives full statutory effect to the CTC and its Aircraft Protocol. This establishes internationally recognized safeguards for ownership, security interests, and repossession.
ii) The Game-Changing PIAO Act, 2025: The enactment of this law implements the Cape Town Convention, allowing lessors to repossess aircraft/engines within 60 days of airline insolvency without NCLT approval materially reducing jurisdictional risk and lowering lease pricing by an estimated 8-10%.
iii) Tax Holiday and Scrapping of TDS: GIFT City IFSC offers a competitive tax regime, including a 10-year income tax holiday (for any 10 consecutive years out of 15) on business profits, capital gains exemptions, and the crucial removal of Tax Deducted at Source (TDS)/ withholding tax on aircraft lease rentals to enhance cash flows and exemption from stamp duty on lease transactions and highly competitive GST structures.
iv) Overcoming the Insolvency Loophole: During previous airline crises, lessors were blocked from reclaiming their aircraft because of the moratorium under India’s Insolvency and Bankruptcy Code (IBC). The PIAO Act resolves this conflict.
v) 60-Day Repossession Guarantee (Alternative A): Through Section 6 of the Act, India implements “Alternative A” of the CTC. This gives creditors and lessors the legal right to repossess their aircraft within 60 days of insolvency without needing approval from the National Company Law Tribunal (NCLT).
vi) Engines as Financial Products: The Government of India formally notified “Aircraft Lease” as a regulated financial product under the IFSCA. This definition explicitly includes operating, financial, and hybrid leases of aircraft engines, helicopter engines, or any parts thereof
vii) Reduced Risk Premium: By guaranteeing a fast, predictable, and legally sound process to recover assets in the event of default, the Act vastly improves creditor and investor confidence. Because lessors no longer have to price in the risk of their multi-million dollar assets being grounded and locked in lengthy court battles, lease rates are projected to decline by 8% to 10%.
viii) Growing Ecosystem: As of late 2025, the GIFT IFSC leasing ecosystem has recorded a total of 303 assets, comprising 134 aircraft, 84 engines, and 85 Auxiliary Power Units (APUs).
II. However, transitioning to rupee-denominated aviation finance in India faces several critical legal, structural, and financial challenges:
i) High Hedging and Currency Costs: Rupee-denominated financing is currently expensive primarily due to foreign exchange risks and the high cost of currency hedging.
ii) Bank Underwriting Gaps: Domestic Indian banks currently have limited experience in complex aviation underwriting, which limits their ability to lead or participate in complex aircraft and engine lease syndications.
iii) Absence of Long-Term Funding Structures: There is a distinct lack of established, long-term funding structures tailored to the extended lifecycles of aviation assets.
iv) Limited Participation of Institutional Capital: The domestic ecosystem has yet to seamlessly channel deep pool capital such as pension funds, insurance entities, and infrastructure financing institutions into the aviation sector.
v) Heavy Reliance on Offshore Leasing: Because a highly competitive domestic financing market is still developing, Indian airlines’ massive leasing demand continues to be largely met by foreign lessors operating out of established offshore hubs.
vi) Deepening Domestic and Rupee-Denominated Finance: Expanding participation from Indian banks, launching Alternative Investment Funds (AIFs), and mitigating currency hedging costs are crucial next steps to transition from ecosystem development to massive commercial scale.
vii) ATF and Operational Relief: Long-standing industry demands such as bringing Aviation Turbine Fuel (ATF) under GST and extending tax exemptions to training simulators remain key to lowering airline operational costs and boosting credit ratings.
viii) The Need for a Dedicated Engine Registry: Unlike aircraft, the DGCA does not maintain a separate register for engine ownership or leases, creating a significant legal and operational challenge for the growing spare-engine leasing market that needs to be addressed. In aviation finance, engine leasing operates as an independent sector, and the lack of a distinct registry creates operational and legal hurdles for engine lessors trying to secure their assets.
III. Asset-Backed Securitization (ABS) is a significant strategic tool for the future of India’s aviation sector. In a typical aviation ABS, an operating lessor bundles a diversified portfolio of aircraft (or engines) and their active leases to raise long-term, non-recourse capital. By transferring these assets into a bankruptcy-remote Special Purpose Vehicle (SPV), the lessor can issue investment-grade rated debt notes to capital market investors. This structure provides immediate liquidity for lessors while offering institutional investors predictable, yield-generating cash flows protected by physical assets. ABS and its role in the emerging Indian aviation ecosystem:
i) A “Real Inflection” for Growth: A major turning point for the aircraft leasing ecosystem in GIFT IFSC will occur when aircraft and engine assets are routinely financed through Asset-Backed Securitization markets alongside global pension funds, banks, and insurers.
ii) Accessing New Capital Pools: Establishing and fostering ABS structures (alongside Alternative Investment Funds, or AIFs) within GIFT IFSC is a key step to channel both global and retail capital directly into aviation assets.
iii) Reducing Foreign Outflows: By utilizing ABS to deepen domestic, rupee-denominated financing, India can build the long-term funding structures needed to reduce its heavy reliance on offshore leasing hubs like Dublin and Singapore.
Also Read: https://aviatech360.com/aircraft-leasing-transition-delivery-ppi/
IV. To transition India from an insurance capacity consumer into the Aviation Underwriting Capital of Asia, the IRDAI and IFSCA should coordinate on systemic regulatory reforms. The exact structural, capital, and regulatory mechanisms that can be leveraged to initiate these three priorities:
1. Form an Indian Aviation Insurance Pool
i) Channel Domestic Institutional Capital: The Ministry of Civil Aviation has confirmed that active efforts are underway to channel long-term domestic capital from insurance entities, pension funds, and infrastructure financing institutions into the aviation value chain.
ii) Aggregate Capacity: Under the guidance of the IRDAI, domestic insurers can pool this newly directed capital to aggregate underwriting capacity. By establishing a structured, sovereign-backed aviation insurance pool, India can retain a larger share of its commercial aviation risk domestically minimizing massive foreign exchange outflows as the commercial fleet scales to a projected 2,250 aircraft by 2035.
2. Build Specialized Underwriting Talent
i) Address the Capability Gap: Industry stakeholders have identified talent availability and the development of specialized “domestic aircraft financing capabilities” as critical bottlenecks that need urgent focus.
ii) Develop Aviation Actuarial Expertise: To transition away from ceding of risk offshore, the IRDAI and IFSCA must co-develop specialized educational and professional programs. Training domestic actuaries in complex aviation risks—such as Hull War, Maintenance, Repair, and Overhaul (MRO) liabilities, and spare engine assets—is vital to building the domestic underwriting capability required to price these catastrophic exposures locally.
3. Integrate GIFT IFSC Reinsurance Syndicates
i) Leverage Deemed Offshore Status: GIFT IFSC’s design as a “deemed offshore jurisdiction” provides the perfect canvas for multi-currency risk transfer and capital mobility under a single-window regulatory authority.
ii) Utilize the Evolving SPV and Trust Frameworks: IFSCA can utilize its recently amended TechFin & Ancillary Services Regulations and its updated Special Purpose Vehicle (SPV) / Trust frameworks to seamlessly host reinsurance syndicates. By enabling domestic tariff area (DTA) insurers to easily transfer and syndicate risk with GIFT IFSC-based international lessors, banks, and global reinsurers, India can establish a highly competitive, multi-currency risk-transfer hub that directly rivals traditional hubs like Singapore or Dublin.
V. Apparently, the IRDAI and IFSCA have received explicit strategic roadmaps from expert committees designed to address the capacity gap and mitigate catastrophic solvency risks. Systemic exposure events like the Air India AI171 crash in 2025 demonstrated that a single major hull loss can easily exceed approximately three times India’s entire annual general aviation premium pool. Regulatory focus has shifted from mere risk-sharing to structural capital reform.
i) The Global Aviation Insurance Hub Blueprint: Under the IFSCA Expert Committee (including the Injeti Srinivas Committee recommendations), a comprehensive framework has been proposed to transform GIFT IFSC into a dedicated Global Aviation Insurance Hub. Key initiatives include allowing Indian and global general insurers to establish IFSC subsidiaries under a light-touch regulatory model with lowered capital entry requirements.
ii) Deepening Reinsurance & Brokerage Ecosystems: To compete with established hubs like Singapore, London, and Dubai, the guidelines recommend actively incentivizing foreign reinsurance brokers and international syndicates to establish a physical presence in GIFT City. This would foster a highly competitive, localized risk-transfer market
iii) Alternate Risk Transfer (ART) Mechanisms: Given the high-exposure limits of modern wide-body fleets, committees suggest moving beyond traditional reinsurance. They propose implementing advanced market solutions within GIFT IFSC, such as catastrophe bonds, parametric risk transfers, and Insurance-Linked Securities (ILS), to spread catastrophic risks directly into global capital markets.
iv) Integrating the DTA and GIFT IFSC: Regulatory synchronization is being sought to align the IRDAI’s Obligatory Cession framework (under Section 101A of the Insurance Act) with GIFT’s multi-currency, deemed-offshore platform. This allows Domestic Tariff Area (DTA) insurers to easily syndicate large-scale aviation risks to GIFT-based international lessors and reinsurers.
To support India’s aviation expansion, IRDAI, IFSCA, and the domestic insurance industry should build capacity to retain a larger share of aviation risk and establish India as Asia’s underwriting hub.
Strengthening technical expertise, expanding capital and reinsurance arrangements, and developing rupee-denominated products will help capture premium flows, reduce foreign-exchange exposure for carriers and lessors, and channel insurance capital into fleet growth and MRO investment. Coordinated regulatory guidance, targeted incentives, and public-private collaboration will accelerate market development and make India a competitive regional center for aviation underwriting.
Authored by:
1. Anup Kumar Mathur, Managing Partner, Shrivatsa Legal LLP
2. Gautam Bose, Senior Partner, Shrivatsa Legal LLP
3. Sandeep Sareen, Executive Director, Shrivatsa Legal LLP
