India finds out how hard it is to build a finance hub from scratch

GIFT City has attracted global banks with tax breaks and modern infrastructure, but the vibrant community its planners promised remains far from reality

A world away from the traffic-choked streets of Mumbai where he lived and worked for 25 years, Mahesh Chhabria now begins his day with a run through his leafy new neighborhood.

 

The 49-year-old fund manager’s serviced apartment in GIFT City, an up-and-coming financial hub in western India, is only a 10-minute drive away from the office. Freed from a tortuous commute, he’s now enjoying a more relaxed lifestyle.

 

“I get more time to read or do yoga as I do not have to navigate terrible traffic every day,” said Chhabria, who is part of a six-member team at SBI Funds International (IFSC) Ltd. and relocated six months ago. The fresh morning air, he added, energizes him for the rest of the day.

 

 

Chhabria is a poster child for GIFT City, a project close to Prime Minister Narendra Modi’s heart since 2007, when he was still chief minister of Gujarat state. Modi’s vision? To build an international finance hub from scratch to rival centers such as Dubai and Singapore, luring overseas banks and foreign capital with streamlined regulation and low — or even no — taxes.

 

The project — also known by its less catchy name Gujarat International Finance Tec-City — is showing signs of success. HSBC Holdings Plc, Standard Chartered Plc and Bank of America Corp. occupy soaring glass-fronted towers, alongside more than 170 asset managers, universities, insurance companies and local tech giants Infosys Ltd. and Wipro Ltd.

 

Evening Exodus

But the dream of creating India’s first “15-minute” walk-to-work city — with advanced waste management, energy-efficient cooling and a lively social scene — is far from realized. Chhabria seems to be the exception rather than the norm. At the end of the day, most of the 28,000 people working in GIFT City head straight to buses and metro trains bound for the nearby cities of Ahmedabad and Gandhinagar.

 

A lack of restaurants and entertainment venues has discouraged potential residents. Even the city’s special carve-out from Gujarat’s alcohol ban (the state is dry out of respect for Mahatma Gandhi, who was born there) has failed to entice people because of the bureaucracy of permits and designated drinking zones.

 

Among those making the evening exodus is Lalit Jadhav, 50, a partner at professional services firm BDO India who’s worked in GIFT City since 2021. He’s been commuting 25 kilometers (16 miles) from Shantigram, a satellite township that’s home to billionaire industrialist Gautam Adani’s corporate headquarters, because it offers better access to hospitals, malls and entertainment.

 

Jadhav is moving closer, but chose to buy a three-bedroom apartment on the outskirts of GIFT City for about 17.5 million rupees ($200,000) — better value than anything he could find in the city itself. His new five-minute commute by car is “enviable when compared to Mumbai or Delhi,” he said. “What we need is to make the living conditions equally enviable.”

 

Vivek Srivastava, who heads Axis Bank’s GIFT City branch, also chose to live in Shantigram. The executive said the working culture in GIFT City is on par with Hong Kong and London and that his 35-minute commute on a smooth, six-lane highway is far shorter than in Mumbai. “I chose this location because it offers an ideal balance, being equidistant from both GIFT City and my son’s school in Ahmedabad,” he said.

 

For Ketaki Mehta, a partner in the GIFT City offices of law firm Cyril Amarchand Mangaldas, one of the hub’s main benefits is the “peace of mind” of a short commute. But you “need to give it a bit more time” for more entertainment options to be available, said Mehta, who lives in a neighboring area and drives to work each day by car.

 

Tax Holidays

 

Rising from reclaimed marshland near the banks of the Sabarmati River, GIFT City covers about 359 hectares (886 acres). Tax holidays, relaxed currency regulations and a single regulator have spurred frenetic activity in the special economic zone. Banking assets in the hub have more than doubled to $90 billion in just two years.

 

Unlike India’s chaotic megacities — where cows, street dogs, rickshaws and trucks commonly compete for space on potholed roads — it feels serene. The infrastructure is state-of-the-art: Utilities run through underground tunnels, refuse is sucked via pneumatic pipes to a central plant, and electric buses ply tree-lined boulevards.

 

But the city is still very much under construction. Cranes dominate the skyline and services remain sparse. On a hot July afternoon, office workers gathered at the “Wall Street Cafe,” a bare-bones eatery in a converted shipping container selling sandwiches and instant noodles. Some of the glitzy towers nearby have basic food courts. But as evening falls, an eerie silence descends on the city.

 

Buying alcohol remains cumbersome, as only permanent employees of GIFT City-based companies can apply for a Liquor Access Permit and business visitors must be accompanied by a passholder to get a drink. When Sachin Sawrikar held a party for his firm Artha Bharat Investment Managers IFSC LLP, only six of his 25 guests had permits. The rest had to present passports or ID cards and complete paperwork, and even then could only drink in certain spots. The addition of state taxes can double the cost of an alcoholic drink, making them pricier than in other Indian cities.

 

The experience left Sawrikar unimpressed. For GIFT City to succeed long-term, it needs the “necessary social infrastructure for rest and recreation,” he said.

 

Utopian Planning

Like other planned-from-scratch smart cities, it could take years for GIFT City to take off as a residential center. South Korea’s Songdo International Business District, conceived in 2001 as a high-tech utopia, struggled for years with a ghost city vibe and remains incomplete two decades later.

 

“A new city must offer a better living environment, better housing, and better jobs than in other areas to attract residents,” said Sarah Moser, an associate professor at Canada’s McGill University who researches utopian planning. There is “little incentive to move to a new area that feels boring and empty.”

 

Even oil-rich petrostates struggle to finish projects and attract tenants, Moser said, citing King Abdullah Economic City on the coast of the Red Sea in western Saudi Arabia, and Madinat Al Hareer in Kuwait. “Builders of new cities should be more realistic about the time scale,” she said. “It could take decades, or even half a century.”

 

Work continues at GIFT City, which is slated to be 67% commercial, 22% residential and 11% social facilities. A 300-bed hospital is nearly complete and Hyatt Regency is building a luxury hotel. A central park with food courts and green spaces is under construction, as is a redeveloped riverfront with promenades. The hub’s only school serves about 2,500 students.

 

GIFT City recently climbed six spots to 46th place in the Global Financial Centres Index, which rates 119 cities worldwide on metrics including infrastructure and business environment. That makes it the top-ranked financial hub in India — Mumbai is ranked 52nd — and among Asia’s top 15.

 

Just 1,200 of the planned 7,500 residential units are finished. One of the developers, Sobha Ltd., has sold 740 units and says demand is picking up. Between 1,500 and 2,000 people currently live in the city, with the population expected to exceed 25,000 by 2030.

 

“Infrastructure creation takes time,” said K. Rajaraman, chairman of the International Financial Services Centres Authority, which regulates the hub. “Over the next few years, a lot of infrastructure under progress will come to fruition."

 

A spokesperson for GIFT City said the hub is supported by the wider social and residential ecosystem of Ahmedabad and Gandhinagar, with new facilities being developed in line with its master plan.

 

For now Chhabria is content with his morning runs, yoga and short commute — and happy to travel to nearby cities for entertainment. Still, he says, more social amenities would “add a new feather to the GIFT cap.”