Cheap loans for all hotel players as govt plans infra status to below three-star tag

Repayment period will be extended to 10-15 years and interest rate would be around 3-4%

Hotel players will soon be able to avail cheap loans with the government planning to offer infrastructure status to the hotel sector, which is facing severe credit crunch thanks to the slowing economy.

In the Budget, infrastructure status was announced for hotel properties which are three-star or higher in category and are located outside cities with population of a million or more.

However, the status now is expected to cover the whole sector spanning across all hotel categories.

Tourism minister Subodh Kant Sahai said the proposal has been sent to the Cabinet for approval. ?The benefit of infrastructure status should be given to city hotels as well as hospitality and tourism sectors generate millions of jobs and contribute to the GDP as well,? he said.

The proposal to grant hotels infrastructure status has been in the works for nearly a decade. However, this time the government is making a strong case for it keeping in view the drying credit situation for the hotel sector and the need for rooms across categories in the country.

Hoteliers across the country feel the infrastructure status announced with riders in this year’s Budget is too little and too late. Federation of Hotel and Restaurant Associations of India (FHRAI), comprising members from all major-star category hotels including Taj and Oberoi, has been lobbying with the government to seek infrastructure status for quite a few years now.

According to FHRAI, the status for three-star or higher category hotels located outside cities with population of one million or more covers only 5% of hotel rooms in the country.

?This time when we met the minister he said he has taken up the proposal and we should hear something positive at the next National Tourism Advisory Council (NTAC) meeting, which is due at the end of this year,? said Kamlesh Barot, president, FHRAI.

The average lending rate that banks offer the sector is 12-13% for a 5-7 year tenure.

Infrastructure status to hospitality industry under the RBI’s infrastructure lending list would mean bank loan repayment periods will be extended to 10-15 years and the interest rate would settle around 3-4% which would translate into lower input costs.

Another industry body, Hotel Association of India (HAI), represented by heads of hotel majors such as East India Hotels, ITC Hotels and Taj Group, too is in constant dialogue with the ministry of tourism for seeking infrastructure status for the industry.

?Though the Budget announcement was a first positive step, the scope of the infrastructure status definitely needs to be extended. The ministry of tourism has strongly pushed our case for the same,? said RK Puri, secretary general, HAI.