India’s credit-starved hotel industry can now afford to heave a sigh of relief. In a move that promises to make credit easily available to the sector, the Union tourism ministry has permitted the hotel industry to go in for external commercial borrowings up to $100 million during the current financial year. Meanwhile, the Reserve Bank of India too has removed hotels from the ‘commercial real estate’ classification. This two-pronged push will make larger credit available to the capital-intensive and credit starved hospitality industry at lower rates of interest, thus bringing down the high cost of the hotel projects.

Tourism ministry sources have that said that efforts are on to obtain infrastructure status for hotel projects and the RBI’s approval is being sought for this. This will help the interest rate to go down further to single-digit levels for hotels. Sources said yet another proposal of the ministry pending with RBI is to provide fiscal amenities for creation of additional hotel room capacity to meet the surge in demand in the tourism sector. The ministry has been canvassing that the hotel segment of the tourism industry is highly capital-intensive and has a long gestation period. India is already facing acute shortage of quality accommodation for both international as well as domestic tourists. With the delinking of hotels from commercial real estates, promoters will be able to seek capital loans from banks and ease out the liquidity issues particularly to the new hotel projects, the sources added.

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