Gujarat’s GIFT city project

Source: By Avinash Nair: The Indian Express

With sops being announced in almost all Union budgets since 2015, the Gujarat International Finance Tech (GIFT) City at Gandhinagar stands at an important cusp with the Rs 4000-crore second phase of the infrastructure project kicking off last month.

The GIFT City project was conceptualised in 2007. However, the actual groundwork of the project, originally a joint venture between the Gujarat Urban Development Company Ltd and Infrastructure Leasing and Financial Services Ltd (IL&FS), started in October 2011 as the global meltdown following the Lehman crisis adversely impacted the project. The first multi-storeyed structure was inaugurated by the then CM Narendra Modi in January 2013. It was Modi who was instrumental in the first wave of investments into GIFT City. In February 2014 — before the crucial Lok Sabha elections — he spearheaded a national summit on financial services and held a closed-door round table discussion with top officials of banks and insurance firms and presented allotment letters to State Bank of India, US-based World Trade Centre, Tata Communications, I-Plex and Global Group for investing Rs 1,000 crore in the project.

The Phase I involving 11.2 million square feet is under various stages of development. “About 3.4 million square feet is fully developed and operational, 2.3 million square feet is under construction and 5.5 million square feet is under planning,” said Tapan Ray, Group CEO and MD of GIFT City Company Ltd. The development covers both the Special Economic Zone (SEZ) and the domestic tariff area. The SEZ has the IFSC, international exchanges and IFSC banking units while the domestic tariff area has a hotel, the Jamnabai Narsee School and towers housing various offices.

In short, 18-20 per cent of the proposed greenfield development at GIFT City has been completed in the last 10 years. About Rs 2000 crore has been spent on infrastructure and the project has attracted Rs 11,000 crore of investments in Phase-I. The first phase had targeted to provide 30,000 jobs. Today more than 10,000 persons work with 225 units in GIFT City which currently have 14 multi-storeyed projects dotting the skyline. However, the project is a far cry from its target to build 110 high-rise buildings and create 10 lakh jobs by 2020.

In its initial phase, the project survived due to the support of the Gujarat government which had given land for the project. It was heavily marketed through the Vibrant Gujarat summits.

The first major fillip for the project came in the way of Union budget announcement in 2015-16, when the then finance minister Arun Jaitley said regulations will be put in place to kickstart India’s first International Financial Services Centre (IFSC) within GIFT City. A year later, Security Transaction Tax, Commodity Transaction Tax, Dividend Distribution Tax and Long Term Capital Gains were abolished or waived off to attract investments. In 2017-18, a unified regulator for the IFSC was announced. A series of sops followed in 2019 which included extension of tax holiday, announcement for beginning of aircraft leasing.

GIFT City has been given importance in the last few budgets since IFSC was set up in 2015… At this stage we need the government to push the project. The tax and other incentives will attract businesses which did not exist in India, for instance, aircraft leasing.

The Phase II of the project which was expected to kick start in 2015 is delayed and has started with one million square feet allotted last month to Ahmedabad-based Savvy Infrastructures, a firm headed by the national chairman of Confederation of Real Estate Developers’ Association (CREDAI). In the second phase, a total of 20 million square feet of development is planned for which GIFT City is expected to spend over Rs 4,000 crore in development of infrastructure.

Debt-laden IL&FS sold its 50 per cent stake in GIFT City for Rs 32.71 crore in the first part of 2020. “In the absence of IL&FS, we are getting support from both the Centre and state government freely. It is now a government entity,” says Ray, a retired IAS officer of the Gujarat cadre who replaced Ajay Pandey as the Group CEO, after IL&FS could no more afford Pandey’s salary. The nominees of IL&FS later stepped down from the Board of Directors.

At present 300-odd people stay in GIFT City. Two more residential projects are coming up. Those working in this project have annual salary packages ranging between Rs 2.4 lakh to Rs 3 crore. The biggest salary packages belong to those working with the IFSC Banking Units or IBUs. The bulk of those working hail from Gujarat, but officials say Human Resource from cities like Mumbai, Pune, Bangalore, Hyderabad and Gurugram have also migrated to this project.

The biggest employer is Bank of Baroda with 2,000 employees, followed by Tata Consultancy Services (1,200 employees) and Bank of America (1,000 employees).

As intended, has the project attracted businesses from foreign locations? What are the upcoming projects?

“It is difficult to quantify the business that GIFT City has attracted from overseas. But the trend has started. For instance, applications from half a dozen, India-centric Alternative Investment Funds from places like Singapore, Mauritius and within India have come. Things have picked up after the unified regulator has come”.

A Special Economic Zone which covers 261 acre within GIFT City (886 acres) exported services worth Rs 4,000 crore in 2019-20. This year, this export stands at almost Rs 3,000 crore.

An international bullion exchange is also being set up and the first trade is expected to take off in June-July 2021. Regulations were finalised in December 2020 and now National Stock Exchange, MCX and BSE have agreed in principle to form one exchange within GIFT City. This bullion exchange will be set up within the IFSC. Bullion vaulting services have already commenced with Sequel Logistics setting up precious commodities vaults for storage of gold and silver. The company is expected to get its first consignment later this month. Siddharth Logistics will be setting up a second such vault, say officials.

A fin-tech hub that will service the technological requirements of financial institutions including banks is also being set up. GIFT City is in talks with Asian Development Bank (ADB) for this purpose. “ADB has built fin-tech centres in states like Odisha. In GIFT City they want to do it on a large scale. It is a combination of creation of infrastructure and development of soft skills. If this deal materialises, the assistance could come in form of a soft loan through the Union Budget. GIFT is already working with iCreate and Bank of America for creating this fin-tech hub.

Though a formal decision in this regard has not been taken, a private player might be invited only when the value of the project needs to be unlocked.