The shift is not just about scale.
It reflects changes in participation, product design, and investor behaviour, making it important to assess both the opportunity and the practical considerations before allocating.
A broader investor base, but with distinct drivers
Participation has expanded, though flows remain uneven across segments.
Institutional investors and HNIs/UHNIs continue to anchor the ecosystem.
Nilesh Choudhary, Founder and CEO at Aikyam Capital Group, a Mumbai-based alternative investment firm, says IFSC fund structures now have over 3,500 investors, with global allocators, family offices, and NRIs using GIFT City for structured cross-border exposure.
He notes that these allocations are increasingly part of mainstream portfolio strategies rather than niche bets.
Alongside this, retail participation—primarily from NRIs—is gaining traction.
Ankur Choudhary, Co-founder and CEO at Belong, a financial services company aimed at simplifying cross-border investments, says retail deposits in GIFT City rose to about $1.32 billion in 2025, with nearly $1.26 billion coming from NRIs.
He attributes this to improved accessibility, with entry points in some products dropping to around $500, compared to earlier high-ticket structures.
Regulatory and tax framework driving adoption
The framework under the International Financial Services Centres Authority remains central to GIFT City’s appeal.
It allows investors to structure foreign-currency-denominated and globally oriented products within India, under a single regulator.
Aikyam Capital highlights the combination of offshore-style flexibility and regulatory familiarity as a key advantage.
Tax efficiency is another driver.
The framework provides time-bound tax holidays, exemptions from certain transaction taxes, and favourable treatment for specific income categories.
Belong adds that some NRI-focused products may offer zero capital gains tax in India, alongside full repatriability, although investors may still be liable for taxes in their country of residence.
Ease of access has also improved. According to Ankur Choudhary, digital onboarding through video KYC and simplified account structures have reduced friction, allowing NRIs to invest directly using foreign bank accounts.
For resident Indians, GIFT City is also emerging as a route to global diversification within existing remittance limits, particularly as domestic mutual funds face constraints on overseas investments.
Product mix: AIFs dominate, but diversification is underway
Investment flows remain concentrated in a few segments.
Alternative Investment Funds (AIFs) continue to lead.
Nilesh Choudhary notes strong traction in Category I and II AIFs for capital commitments, and Category III AIFs for investor growth, with the latter accounting for close to 2,000 investors.
Belong estimates AIF investments at around $15.51 billion in late 2025, reflecting sustained institutional interest.
Foreign-currency-denominated products are also seeing increasing demand. Dollar-based deposits, in particular, have gained traction among NRIs, with deposits of about $1.26 billion indicating growing retail participation.
Retail-oriented mutual fund offerings remain relatively limited but are gradually expanding as the ecosystem evolves.
In terms of returns, Aikyam Capital says performance is broadly comparable to similar India-focused investments, with the key difference often arising at the net level due to tax efficiency and structuring.
Key considerations before investing
Both Aikyam Capital and Belong highlight that GIFT City, while growing, is still an evolving market, and investors should account for several factors:
- Liquidity: Market depth remains lower than in established global financial centres, which can impact exit timelines, particularly in less liquid instruments.
- Taxation: While the framework is favourable in India, outcomes vary based on investor profile and structure. As Ankur Choudhary notes, home-country tax obligations may still apply for NRIs.
- Currency exposure: Many products are denominated in foreign currency, but underlying returns may be linked to rupee assets, making exchange rate movements a key variable.
- Product depth: The range of retail investment options remains narrower than in domestic markets, though it is expanding.
- Investment horizon: Given these factors, Nilesh Choudhary indicates that GIFT City opportunities are better suited to medium- to long-term investors.
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