Hotels taken out of real estate exposure to facilitate loans from banks at lower rate of interest; issue was taken up with the RBI by Ministry of Tourism
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15 sept 2009 16:36 IST
On the request of the Ministry of Tourism and recognizing that Tourism is one of the world’s largest industry, which plays a prominent role in economic growth of the country the Reserve Bank of India (RBI) has notified that hotels be taken out of the Real Estate Exposure for Banks to those entrepreneurs who themselves run these ventures. This new relaxation/incentive would enable hotels to avail larger credits at better interest rates, which would help to lower the overall cost of such hotel projects. Secretary, Ministry of Tourism had actively taken up with the Ministry of Finance/Reserve Bank of India earlier this year, to accord infrastructure status to hotel projects, and provide fiscal amenities for creation of additional hotel room capacity to meet the surge in demand in the tourism sector.

The hotel segment of the tourism industry, is highly capital intensive in nature and has a long gestation period. India is facing shortage of good quality accommodation for both the international as well as domestic tourists. The demand for rooms will grow in the years to come.

Earlier, on the request of Ministry of Tourism, External Commercial Borrowings (ECB) was permitted to the hotel industry so that hotels could avail of ECB upto US$ 100 million for financial year and with the recent announcement of RBI, hotels have been de-linked from Commercial Real Estate which will now enable the hotels to seek capital loans from banks and ease out the liquidity issues particularly to the new hotel projects.