Extended tax holiday to drive GIFT City office demand, realty development

MUMBAI: The government’s move to extend the tax holiday for units in GIFT City to 20 years is expected to significantly boost demand for office space, accelerate commercial real estate development and improve long-term leasing visibility at India’s only International Financial Services Centre (IFSC).

By doubling the tax deduction period for IFSC units and offshore banking units (OBUs), the government has provided long-term fiscal certainty, supporting larger office commitments, campus-style developments, and sustained absorption of Grade A commercial space.

Under the proposed amendments to the Income-tax Act, IFSC units will be eligible for a 100% deduction on specified incomes for 20 consecutive years out of a 25-year block, compared with the earlier 10-year window. After the deduction period, business income from IFSC operations will be taxed at 15%, versus 35% for overseas companies elsewhere in India.


“This policy stability strengthens GIFT City’s position as a globally competitive financial hub within India’s jurisdiction and reinforces confidence among banks, fund managers, exchanges and other IFSC participants. The rationalisation of deemed dividend provisions for treasury centres is also a positive step, as it removes structural tax friction for multinational groups and facilitates efficient treasury and funding operations through GIFT City,” said Sanjay Kaul, MD & Group CEO, GIFT City.

The changes, which take effect from April 1, are expected to encourage global banks, fund managers, insurers, and leasing companies to commit to longer leases and larger floor plates at GIFT City.

“The extended incentive strengthens the economic ecosystem around GIFT City. As financial institutions expand, demand will extend beyond offices to infrastructure, services, and skilled talent. This multiplier effect will deepen the market, support sustained job creation, and boost confidence for long-term private investment. Social infrastructure currently taking shape will further support GIFT City’s evolution into a liveable business district,” said Jaxay Shah, CMD, Savvy Group.

From a real estate standpoint, longer tax certainty improves occupier visibility and reduces risk for developers and institutional investors backing office projects within the IFSC. It also supports phased construction, pre-leasing and capital deployment into commercial assets tailored to financial services tenants.

The GIFT City authority has so far allotted development rights for 29.45 million sq ft. As of end-December, the city has 25 operational buildings, 37 under construction, and 9 at the planning and development permission stage, taking the total to 71 buildings.

The city has already seen steady office absorption over the past few years and now with the extended incentive is expected to ease short term constraints and translate into higher occupancy and rental stability, experts said.

Developers are also expected to accelerate commercial project activity, while global real estate funds and domestic institutional investors could find greater comfort in underwriting long-duration office assets within the IFSC framework.

With improved fiscal visibility and a predictable post-holiday tax rate, the budget measure is likely to strengthen GIFT City’s position as a long-term commercial real estate destination for international financial services.