GIFT City fund entities hit 217 as tax overhaul, capital-control exemptions draw BlackRock and Standard Chartered. Here is why the Gujarat hub is finally competing with Singapore and Dubai.
India's Gujarat International Finance Tec-City, better known as GIFT City, is finally drawing the kind of global fund interest its planners envisioned more than a decade ago. The financial hub in Prime Minister Narendra Modi's home state is emerging as a gateway for both international investors chasing India's growth story and resident Indians seeking overseas wealth solutions, experts said.
Earlier this year the government overhauled tax rules to bring GIFT City in line with Singapore and Dubai International Financial Centre, according to Rajesh Gandhi, a partner at Deloitte India. Those changes, paired with relaxed capital controls on outbound investments routed through the city, are driving a surge in inbound and outbound fund setups, Gandhi said.
The numbers back him up. Fund management entities registered in GIFT City rose to 217 in May from 194 in November last year, according to government data. The pipeline keeps growing.
Standard Chartered last week announced plans to launch its Signature CIO funds from the city. Samir Subberwal, the bank's global head of wealth solutions, told CNBC the funds would launch "in the coming weeks" and that the bank would expand its wealth management offering there. Standard Chartered was among the first foreign banks to set up in GIFT City in 2020.
BlackRock is also moving in, through its joint venture with Mukesh Ambani's Jio Financial Services. The venture, Jio BlackRock Asset Management, secured regulatory approval to launch funds from GIFT City in May. Rishi Kohli, the firm's chief investment officer, told Moneycontrol it plans to start two outbound funds before the end of September – one global equity fund and another targeting emerging markets.
The appeal partly reflects a structural bottleneck. Indian asset managers face tight capital controls on foreign deployment, and an aggregate $7 billion ceiling on outbound investments is already exhausted, experts said. Funds structured through GIFT City are exempt from that cap, giving them a direct route to the growing pool of Indian investors seeking international exposure.
Despite Indian equity funds logging 65 consecutive months of positive inflows, Indian markets have underperformed global peers. GIFT City funds can capture that gap.
Still, the city has a long way to go. On the regulatory side, GIFT City is on par with global centers, but it needs to shed its image as an India-only destination and match the lifestyle pull of cities like Dubai and Singapore, experts said.
Vivek Singhania, co-founder of Mumbai-based fund administration firm Dovetail Capital, argued that patience is warranted. DIFC took 20 years to become the powerhouse it is today. "Regulatory structures at GIFT City were formed around 2020," he told CNBC. "Now things are gradually coming together."
His firm is in talks with several U.S. and Singapore-based funds, as well as Indian funds, keen to set up in the city.
Vikas Satija, managing director and CEO at Shriram Wealth, scouts GIFT City funds for high-net-worth clients in India and abroad. He predicted the city will become a key global financial center by 2030. "The arrival of BlackRock is a big sign," he said.
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