Budget 2025: New IFSC Incentives to Drive Real Estate Expansion in GIFT City

The Union Budget 2025-26 has introduced several measures aimed at strengthening the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT City). The proposed incentives are expected to enhance its position as a global financial hub and drive real estate development within the region.

Key Announcements for IFSC in Budget 2025

Finance Minister Nirmala Sitharaman, in her budget speech on February 1, 2025, announced various incentives for businesses operating in IFSC. The key proposals include:

• Specific benefits for ship-leasing units, insurance offices, and treasury centres of global companies.
• Extension of the deadline for entities to commence operations in IFSC to claim benefits, now set at March 31, 2030.
• Additional tax concessions to attract financial institutions and investors.
• Exemption on life insurance policies issued by IFSC insurance offices.

These measures are designed to promote greater participation from international financial institutions and create a more business-friendly regulatory environment.

Impact on GIFT City’s Real Estate Market

The incentives proposed in the budget are likely to boost demand for commercial office spaces, residential properties, and infrastructure within GIFT City. Real estate consultants anticipate increased interest from domestic and international firms looking to set up operations in the IFSC.

Increased Demand for Commercial Spaces

With financial institutions, fund managers, and global companies expected to expand operations in IFSC, demand for Grade A office spaces is set to rise. GIFT City already hosts several banks, insurance companies, and financial service firms, and the new incentives may encourage more businesses to enter. This expansion will likely lead to increased office leasing activity and higher occupancy rates in commercial towers.

Approximately 30% of the total 880-acre area of GIFT City is allocated for residential developments. The growing workforce and business activity in the region will drive the need for more housing options. Developers are expected to accelerate residential construction to meet the demand from professionals and expatriates relocating to the city.

Infrastructure Development

As GIFT City attracts more businesses and residents, supporting infrastructure will need to expand. This includes roads, public transport, utilities, and social amenities such as schools and hospitals. The government's commitment to developing world-class financial infrastructure aligns with broader urban planning efforts in the region.

The extension of the tax incentive deadline to 2030 provides long-term policy stability, which is crucial for investor confidence. Businesses considering investment in GIFT City can now plan with a clearer understanding of the regulatory environment. This certainty is expected to attract both institutional investors and real estate developers seeking to capitalize on GIFT City's growth potential.

Comparison with Other Global Financial Hubs

To position itself as a leading global financial centre, GIFT City competes with financial hubs such as Dubai International Financial Centre (DIFC), Singapore, and Hong Kong. While these cities have established ecosystems with extensive international participation, GIFT City offers competitive tax structures, regulatory support, and lower operational costs.

Challenges and Considerations

While the budget incentives create a favorable environment for growth, some challenges remain:

• Regulatory Framework: Continuous improvements in ease of doing business and regulatory clarity will be necessary to attract large-scale investments.
• Market Maturity: Compared to established global financial hubs, GIFT City is still in a growth phase and needs time to develop a robust ecosystem.
• Infrastructure Readiness: Timely execution of infrastructure projects will be crucial in accommodating the anticipated expansion of business and residential activities.

Outlook for Real Estate Growth

Experts believe that GIFT City’s real estate sector will see steady growth over the next five years, driven by increasing corporate presence and the demand for high-quality commercial and residential spaces. The incentives announced in Budget 2025 reinforce the government's commitment to establishing GIFT City as a premier financial destination, making it a focal point for real estate development in Gujarat.

The Union Budget 2025-26 has laid a strong foundation for the expansion of GIFT City’s IFSC by introducing targeted incentives and regulatory support. The expected rise in business activity will lead to greater demand for office and residential spaces, positioning GIFT City as a key driver of real estate growth in the region. Developers, investors, and businesses will closely monitor policy developments and market trends to capitalize on emerging opportunities in the evolving financial district.