Introduction
India's financial sector is evolving at a breakneck pace. The two cities that are leading the front are - Mumbai, India's traditional money centre, and GIFT City, which is an ambitious, smart city initiative by the Government of India aiming to compete and be at par with global financial centres, with its state-of-the-art infrastructure and regulatory benefits, GIFT City is fast becoming a strategic choice to Mumbai.
This blog helps you understand the contrasting natures of the cities on key criteria.
Overview of GIFT City and Mumbai
- Mumbai: According to the latest growth patterns, the city's population is approximately 26 million. The journey of Mumbai as the financial capital of India can be traced back to its rich history as a prominent trading port. From the days of the East India Company to today’s globalisation, Mumbai has been a hub of commercial activity. Popularly referred to as the financial capital of India, it is home to the Reserve Bank of India (RBI), the Bombay Stock Exchange (BSE), and the National Stock Exchange (NSE).
- Gift City: Situated between Ahmedabad and Gandhinagar, GIFT City currently houses 15,000 to 20,000 residents in 2024, with projections to reach 100,000 by the end of 2025. As India's first operational International Financial Services Centre (IFSC), it has been driving financial growth since its inauguration on April 10, 2015.
As stated by Prime Minister Shri Narendra Modi, “The vision is to create a world-class finance and IT zone for India to provide services not only to India but to the entire world.”
It aims to position India as a competitive financial hub in the global realm, on par with other financial hubs such as Dubai, Singapore and London.
Financial and Business Opportunities
Mumbai's mature financial ecosystem provides businesses with a broad network of banks, institutional investors, and financial service providers, thanks to the city's booming stock market, strong fintech ecosystem, and high density of venture capital firms. Mumbai accounts for an impressive contribution to India's financial services. For instance, it accounts for roughly 5-6% of India's GDP.
In comparison, GIFT City offers financial services in international currencies with fewer restrictions. Its IFSC framework draws a considerable amount of foreign investors, enabling international banks, offshore funds, and fintech companies to do business with clients across countries easily.
So far, over 400 firms, including corporates like JP Morgan, HSBC, and Japan’s Mizuho Bank, have shown interest in GIFT City.
As per the recently released Oct-Dec 2024 bulletin of IFSCA (The regulatory body of GIFT City)
Total banking assets at GIFT IFSC reached USD 78 billion.
Cumulative Banking Transaction has reached USD 120 billion.
Cost of Living and Doing Business In Mumbai
Mumbai is among the most expensive in India. At the time of publishing this post, prices for commercial property for rent in upscale Mumbai areas such as Bandra-Kurla Complex (BKC) and Nariman Point are amongst the highest, ranging between ₹35,000 to ₹7.9 lakh per month.
For residential rentals:
A 1 BHK flat would usually be rented out from ₹20,000 to ₹50,000 per month, depending on the locality.
A 2 BHK flat in an upscale South Mumbai area can cost up to ₹1.5 lakh a month.
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Cost of Living and Doing Business In Gift City
On the contrary, due to the lower costs of commercial and residential spaces, GIFT City stands as a potential option for businesses looking to expand and grow in India without the costly price tags of Mumbai. The rental prices for commercial spaces in GIFT City start from ₹35,000 per month and onwards, depending on the requirements.
For residential rentals:
A 2 BHK flat would usually be rented out from ₹18,000 to ₹50,000 per month.
A 3 BHK flat would be up for rent in the range of ₹20,000 to ₹30,000 per month. The availability of 3 BHKs in GIFT City is limited.
Infrastructure and Urban Development
Mumbai is a great economic hub with business districts such as Nariman Point, Bandra-Kurla Complex (BKC), and Lower Parel, hosting numerous office buildings, corporate headquarters, and financial institutions. Infrastructure projects like the Coastal Road and the Trans Harbour Link improve connectivity and ease commutes across the city's suburbs.
However, rapid urbanisation and population growth strain Mumbai’s infrastructure. To sustain growth, officials and urban planners must tackle traffic congestion, inadequate public transport, and housing shortages immediately.
GIFT City is envisioned with the idea of integrated and sustainable living in mind. It has amenities such as luxury office spaces, high-speed connectivity, 100% underground utility services, district cooling facilities, and digital governance with ease of doing business and a “walk to work” concept in implementation. Additionally, it acts as a central pillar in the tri-city approach situated between Ahmedabad and Gandhinagar, placing it in a strategic location for a rapid influx of infrastructure and urban development projects.
However, only 30% of GIFT City is operational, with the rest still under construction. Transport facilities and lack of leisure activity options after working hours are some issues which need immediate attention.
Tax and Regulatory Benefits
One of the notable strengths of GIFT City is its tax advantages.
GIFT IFSC provides,
100% income tax exemption for 10 out of 15 years.
Transactions carried out on GIFT IFSC exchanges are exempt from Securities Transaction Tax (STT), Commodities Transaction Tax (CTT), and stamp duty, making the centre even more attractive.
Non-resident transfer of specified securities listed on GIFT IFSC exchanges is exempt from capital gains tax.
Units in GIFT IFSC are exempt from FEMA regulations, thus making financial transactions easier for non-Indian entities.
While presenting a broader market, Mumbai lacks these tax advantages and is thus not attractive for companies keen to take advantage of these provisions. Companies operating in GIFT City also benefit from an even more liberal regulatory framework exclusively intended for global financial services, and as a result, they are emerging as a preferred choice for international investors.
Lifestyle and Quality of Life
Mumbai follows a tropical climate with hot and humid summers 25°C–35°C and heavy monsoons between June and September. Winters between 18°C–30°C are light and pleasant with lower humidity. Mumbai is a confluence of films, fashion and finance, along with its mouth-watering street food. Naturally, the openness of Mumbai to various cultures and thoughts has enabled knowledge and skill exchange, contributing to the city's growth. The air quality index (AQI) in Mumbai ranges from 98 to 150, indicating moderate to unhealthy pollution levels.
In comparison, GIFT City, aside from the monsoon season, has extremely dry, hot summers with temperatures between 25°C–42°C and moderate winters between 10°C–25°C. The city experiences moderate monsoons between June and September. It provides a peaceful and modern lifestyle with cleaner surroundings and a sustainable living approach in implementation. The city becomes deserted after working hours, tossing the expectation of nightlife in GIFT City. Planned residential complexes, Hotels and availability of facilities such as international schools, hospitals, and recreational facilities are limited as of now. AQI levels of Gift City range from 100-200, indicating unhealthy pollution levels.
Investment Opportunities
Mumbai’s real estate has been the most expensive in the world for a while now, with consistent appreciation all the way from commercial to residential properties. In prime areas, the annual appreciation clubbed around 6-8%.
GIFT City, being in its initial stages of construction, offers gigantic real estate investment options requiring minimal capital expenditure and huge returns as the city develops further and more companies are attracted. A few of the diverse investment opportunities are:
1. Real estate Investments
Awfis, a major player in the co-working space, recently leased 30,221 sq. ft. of office space in 2024, signifying the strong demand for premium commercial real estate. The real estate sector is poised for significant growth as more businesses establish their operations within the city.
2. Financial Services
GIFT City also features India's first International Bullion Exchange, through which investors can diversify their portfolio with gold and other precious metals.
3. Fintech Innovation
GIFT City additionally offers fintech startups the backing of some incubation and acceleration programs that matter for growth and innovation. As of September 2024, both Infosys and Wipro have leased space at Pragya 2 tower of Savvy Group in SEZ to open their hubs to provide technological solutions to financial services, reflecting the growing importance of the city in fintech space among Global and Indian Tech giants.
4. NRI Investment Opportunities
Investment options are available for NRIs, too. Through IFSC, NRIs can invest in real estate, bonds, and equities. For NRIs, the city's simple tax regime, easy repatriation, and general connectivity to the world allow a good mix to diversify their investments and profit from India's growth.
Accessibility and Connectivity
Mumbai is well served by an international airport and well-planned rail, and the recently inaugurated metro lines offer a clean and efficient mode of transportation, all of which make movement around this city quite easy. Yet, the city struggles to provide accessible and efficient mobility experiences for commuters. Despite the expansion of metro lines within the city, the footfalls currently are low when compared to the city’s heartbeat, i.e., The Mumbai local, which carries over 7 million people on a daily basis.
At GIFT City, which is situated 30kms from Ahmedabad and 12kms from Gandhinagar, the road, rail, and air networks, along with green public transport options, are being integrated to tackle the transportation issues faced in GIFT City and active measures are taken by the Government regarding the same.
For instance,
Multiple buses are running between GIFT City, Ahmedabad, and Gandhinagar, with active measures in place to enhance and incrementally roll out electric bus fleets for better last-mile connectivity.
Opened in 2024, the Metro Rail Station connects Ahmedabad and Gandhinagar, providing seamless access for students, professionals, and investors.
These facilities cater to the growing number of professionals and visitors in the city. Ahmedabad is the nearest international airport, providing connectivity at the global level and making travel easy for business travellers. The upcoming bullet train corridor between Mumbai and Ahmedabad via GIFT City will strengthen GIFT City's position further.
Which City Is Better for Startups and NRIs?
For startups looking for a robust financial system, Mumbai provides unparalleled networking opportunities, access to investors, and a well-established market.
For NRIs and companies focused on global financial operations, GIFT City presents a compelling value proposition with its IFSC benefits, tax incentives, and a cost-effective business environment. NRIs who wish to invest in India but are not available on a global financial platform may find GIFT City more desirable.
Conclusion
It is your business goals, financial considerations, and lifestyle that determine whether to choose Mumbai or GIFT City. Mumbai continues to be India's financial hub with a well-established business ecosystem, but GIFT City is a new challenger with futuristic infrastructure, reduced costs, and special tax benefits. For new start-ups and NRIs, GIFT City offers a new hub with international benefits, while Mumbai remains the preferred destination for mature businesses looking at large market access.
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