Impetus to hotel development in India

By: |
May 12, 2016 4:48 PM

As per the Report of the “Working Group on Tourism” for the 12th Five year Plan (2012-17) for a projected annual growth of 12 per cent in foreign tourist arrivals (FTAs), the requirement of additional hotel rooms under classified category in 2016 over 2010 is estimated to be 1,90,108

As per the Report of the “Working Group on Tourism” for the 12th Five year Plan (2012-17) set up by the Planning Commission, for a projected annual growth of 12 per cent in foreign tourist arrivals (FTAs), the requirement of additional hotel rooms under classified category in 2016 over 2010 is estimated to be 1,90,108. Construction of hotel is primarily a private sector activity. The Ministry of Tourism, Government of India only classifies operational hotels under its voluntary scheme of classification/approval of hotels.

Dr Mahesh Sharma, Minister of State for Culture and Tourism, and Minister of State for Civil Aviation; in his reply in the upper house of the Parliament informed about the incentives by the Government of India for the hotel industry.

In order to give stimulus for construction of new hotels, these incentives include:

  • Five year tax holiday svheme for two, three and four star category hotels located in all UNESCO declared World Heritage sites (except Mumbai and Delhi) for hotels operating w.e.f. April 1, 2004 to March 31, 2013
  • Extension of investment-linked tax incentives under Section 35AD of the Income Tax Act to new hotels of two-star category and above anywhere in India, which will facilitate growth of accommodation in the country
  • The Reserve Bank of India (RBI) has de-linked credit for hotel projects from commercial real estate (CRE), thereby enabling hotel projects to avail credit at relaxed norms and reduced interest rates
  • Hotel and tourism related industry has been declared a high priority industry and foreign direct investment (FDI) is allowed upto 100 per cent under the automatic route

The Ministry of Finance, Government of India, has also included the following in the ‘Harmonized list of Infrastructure sub-sector’ to boost supply of hotel rooms in the country:

  • Three star or higher category classified hotels located outside cities with population of more than one million
  • Hotels with a project cost of more than ₹ 200 crore each in any place in India and of any star rating

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