The Department of Economic Affairs, Ministry of Finance, Government of India has issued a notification dated 7 October, 2013 (copy enclosed) whereby the Harmonised Master List of Infrastructure Sub-sectors has been expanded to include – Hotels with project cost of more than 200 crores each in any place in India and of any star rating and Convention Centres with project cost of more than 300 crores each. (Eligible costs exclude cost of land and lease charges but include interest during construction). This is in addition to “Three-star or higher category classified hotels located outside cities with a population of more than one million”, which had already been included in the RBI’s Infrastructure Lending List.
Applauding the Government’s initiative, Vivek Nair, Immediate Past President and Honorary Secretary, FHRAI said, “To accomplish the Ministry of Tourism’s vision of doubling our Foreign Tourist Arrivals (FTAs) and Domestic Tourist Visits (DTVs) in the 12th Plan Period (2012-17), the hotel industry is required to augment our existing room inventory by another 1,80,000 classified guest rooms. Factoring the contemporary trends in development costs, this would entail further capital investment of a staggering Rs. 1,25,000 crores. In the present high interest-rate environment wherein the industry is also witnessing a temporary demand-supply mismatch on account of the economic slowdown, we had been persistently articulating that proactive policy action was imperative to insulate the requisite long-term investment in the sector from cyclical macroeconomic volatility.
With the recently announced measures, large capital-intensive hotel projects will now be entitled to avail term loans with longer repayment tenures of 15 years at lower rates of interest, higher debt-to-equity ratio of up to 4:1, access more funds through relatively low-cost external commercial borrowings and become eligible for financial assistance including takeout financing from specialized agencies like IDFC, IIFCL and the newly set up Infrastructure Debt Funds (IDF). This would strengthen the industry’s competiveness and financial sustainability.
The Indian hospitality industry is confronting twin challenges of continued global uncertainty and a sharp domestic economic downturn. However, although the corporate/ business segment remains sluggish, demand from leisure travellers has been robust. We will focus on enhancing our value proposition to this key segment as a driver for the sector’s future growth. The industry is both committed and optimistic of achieving the ambitious outlook which we and the Government have collectively envisaged.”
