India's aircraft finance ecosystem: early innings, fast runway
India’s aviation sector is entering a period of decisive growth, ushering in a formative chapter for aircraft finance. In recent years, passenger volumes have rebounded strongly, airlines have placed record orders, and the policy push behind Gujarat International Finance Tec-City (GIFT City) is steadily widening the menu of financing options.
Yet the market architecture is still maturing. Participants are testing the waters with simpler structures, while legal alignment and the supporting ecosystem for special purpose vehicles (SPVs), servicing and MRO continue to develop.
For lessors, lenders and servicers, this is a growth market with growing pains.
Aviation in India – a market with momentum
India's aviation story is becoming increasingly prominent. The market represents a sizeable long-term opportunity, but one that is currently still constrained by regulatory, structural and technical frictions.
The underlying growth drivers are clear – passenger demand continues to expand, particularly for domestic and regional carriers, bringing renewed attention from global lessors, financiers and investors.
The opportunity is real, but the ecosystem is still maturing.
India is not yet comparable to established aircraft finance hubs like Dublin or Singapore. Participants are largely in what industry stakeholders describe as a "toe-dipping" phase, testing the market through smaller and simpler transactions before committing to larger and more sophisticated structures.
For organisations willing to engage early, however, this formative stage presents a valuable opportunity to build relationships, knowledge and market credibility ahead of broader expansion.
Demand is real and durable
The most important point for investors and financiers is that India's aviation growth is being driven by underlying demand rather than short-term market conditions.
The country's growing middle class, expanding regional connectivity and increasing preference for air travel continue to support airline growth. As carriers expand fleets and routes, financing requirements naturally increase alongside them.
This demand creates an attractive backdrop for lessors and capital providers. The challenge is how to structure these opportunities efficiently within an evolving legal, tax and regulatory environment.
GIFT City: a springboard still being engineered
One of the key discussion points about India's aircraft finance market is GIFT City.
GIFT City has been positioned as a strategic initiative to attract international financial services activity to India, including aviation leasing and finance. The framework is in place, participation has begun, and market interest is evident. Yet practical challenges remain.
One notable issue is the US$3 million minimum capital or deposit required for structuring SPVs. For some lessors, particularly those assessing transactions on a portfolio basis, this requirement presents a significant material hurdle, particularly if capital must remain locked rather than operational.
Discussions with regulators are ongoing, and regulations are still being refined. There is active dialogue with regulators (including IFCA) about revisiting or restructuring the capital requirement. Because the current framework discourages some lessors from structuring locally, any solution presented must address this while continuing to make the jurisdiction more attractive to international participants.
Overall, GIFT City is at an inflection point. What happens next will depend on how effectively practical obstacles are addressed and whether the market can demonstrate scalable transaction activity.
Why deal structures are evolving
Another notable shift in the market is the changing mix of transaction types.
Historically, sale-and-leaseback (SLB) structures have played a prominent role in aviation finance. However, industry sentiment suggests a decline in these transactions in India due to several factors.
One is the availability of cheap local capital, which reduces the appeal of SLB structures for airlines. When airlines can access attractive financing domestically, the economic rationale for traditional leaseback structures becomes less compelling.
At the same time, global lessors struggle to compete when funding costs and spreads are comparatively less attractive than domestic financing.
As a result, there is a notable pivot towards asset-backed securities (ABS) and structured finance deals. These structures often provide greater flexibility, attract a broader investor base and support financing strategies for larger aircraft portfolios.
While this transition will not happen overnight, it highlights an important point: as the market matures, transaction complexity is likely to increase.
Where deals are structured – and why it matters
Despite strong growth in India's aviation sector, many aircraft finance transactions are still structured outside of India, primarily in offshore jurisdictions or hubs.
The reasons are nuanced, but market participants point to several areas that continue to influence jurisdiction selection, including legal certainty, tax efficiency and operational flexibility.
There is a "missing technical link" that helps explain why India has not yet become the default structuring jurisdiction of choice, and capital markets experts point to a clear need for deeper technical analysis.
However, the situation is unlikely to remain static. Regulatory refinements, greater market experience and increasing transaction volumes may gradually reduce these barriers.
The growing importance of governance and administration
As deal complexity increases, it spurs a growing demand for independent governance, reporting and administration.
In simpler aircraft finance transactions, the role of corporate service providers (CSPs) is relatively limited. For straightforward, bilateral transactions, law firms often handle administration and reporting requirements as part of wider legal mandates, reducing the need for separate providers.
The picture changes for CSPs when more complex structures enter the market.
For ABS transactions, multi-aircraft portfolio structures and securitisations that require independent SPV management and reporting, more sophisticated governance and oversight are needed. These elements help support investor confidence, operational transparency and regulatory compliance, and are generally delivered more effectively by experienced CSPs.
As a result, the evolution of India's aviation finance market and the growth of CSP involvement are closely linked, as market sophistication will directly correlate with CSP demand.
Growth with growing pains
Despite the obvious challenges involved in India's aircraft finance ecosystem, current market discussions suggest a sense of cautious optimism.
Participants are not questioning whether India's aviation finance market will grow, nor do they believe activity has stalled. Deals continue to close, and market development continues.
The debate is largely about pace rather than direction.
Momentum is expected to strengthen as GIFT City regulations continue to evolve, technical uncertainties are clarified and larger, more complex transactions become commercially viable.
The organisations that engage with the market now will be better positioned to benefit as these developments unfold.
Talk to us
Aircraft finance is a global industry that depends on efficient structuring, strong governance and seamless cross-border administration. Transactions are complex, demanding precision and agility.
With our global footprint, we support aircraft lessors, lenders, investors and aviation stakeholders through a network that spans major aviation and capital markets jurisdictions, including India and GIFT City.
Our services include jurisdictional structuring support, SPV governance and administration, reporting and compliance oversight, and solutions designed to support more complex capital markets transactions.
We help you evaluate jurisdictional options, establish fit-for-purpose operating structures and create scalable governance frameworks that can support future growth.
Interested in learning more about our aviation finance services? Speak with an expert today.
