INDIA'S Ministry of Finance now includes hotel projects under its harmonised master list of infrastructure sub sectors, allowing large capital-intensive hotel projects access to loans with longer repayment periods.
According to the October 7 notification from the ministry, the change is for hotel projects costing more than Rs2 billion (US$32.3 million) and convention centres of over Rs3 billion in any part of India.
Such projects will be entitled to long-term loans with repayment tenures of 15 years at lower rates of interest, higher debt-to-equity ratio, access to more funds through low-cost external commercial loans and financial assistance including takeout financing from specialised agencies such as IDFC, India Infrastructure Finance Company and the new Infrastructure Debt Funds.
The Reserve Bank of India last year also began including three-star or higher categories of hotels located outside cities with populations bigger than one million to its infrastructure lending list.
Applauding the move, Vivek Nair, honorary secretary of the Federation of Hotel and Restaurant Associations of India, said in an email to TTG Asia e-Daily: “In the present environment of high interest rates where the industry is also witnessing a temporary demand-supply mismatch on account of the economic slowdown, we have been persistently articulating that proactive policy action was imperative to insulate the requisite long-term investment in the sector from cyclical macroeconomic volatility.”
Indian hotels are expected to require investment of Rs1.3 trillion for the 180,000 classified guest rooms predicted to be built by 2017.
However, Crowne Plaza New Delhi Okhla’s general manager, Barun Jolly, commented: “It is a good move, but we really have to see how well it is implemented and how easy is the process of disbursement. If executed well, it will lead to growth of a lot of hotels in Tier Two and Tier Three cities. Development of hotels in these cities will greatly augment domestic travel too.”