Availability of Hotel Rooms 2010 Requirement of Hotel Rooms 2016 Additional Requirement in 2016
Classified
1,28,771
Unclassified Total Classified
25,83,519 27,12,290 3,10,523
Unclassified
46,61,807
Total Classified Unclassified Total
49,72,330 1,81,752 20,78,288 22,60,040
Visa on Arrival Scheme Government introduced “Tourist Visa-on-Arrival” Scheme for tourists from Eleven Countries. Countries include New Zealand, Japan, Indonesia, Phillippines, Singapore, Finland, Cambodia,Vietnam, Luxemberg, Myanmar and Laos. Apart from this, Union Minister Shri K Chiranjeevi, 1st March, 2013, has submitted a proposal to extend Visa on Arrivals to 16 more countries.
Hotel classification
In July, 2012, Ministry of Tourism has revised the Hotel Classification Guidelines. Hotel Project must apply for Classification within 3 Months of commencing operations.The Hotel and Restaurant Approval and Classification Committee (HRACC) under Ministry of Tourism (MoT) inspects and assesses the hotels based on the facilities and services offered. Classification approvals will be valid for 5 years. Local approvals require: • Municipal Authority • Concerned Police Authority • Any other local authority as maybe applicable / required (viz. Pollution Control Board / Ministry of Environment and Forests etc.) • Approval / NOC from Airport Authority of India for projects located near the Airport
Finance
Inclusion in priority sector lending For the purpose of Harmonising the definition of “Infrastructure Lending”, RBI on 20th November, 2012 include three star or higher category classified hotels located outside cities with population of more than 1 million in the Definition of Infrastructure Lending.This would enable the hotel industry to avail financial assistance more easily and at relatively lower interest rates. Delinked from Commercial Real Estate (CRE) 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. Foreign Direct Investment Foreign Investment is freely permitted in almost all sectors. Under Foreign Direct Investment scheme investment can be made by non-resident in India under two routes; 1. Automatic Route 2. Approval Route 100% FDI is allowed for Hospitality sector under Automatic route For Foreign technology agreements, automatic approval is granted if• Up to 3% of the capital cost of the project is proposed to be paid for technical and consultancy • Up to 3% of the net turnover is payable for franchising and marketing/publicity support fee, and • Up to 10% of gross operating profit is payable for management fee, including incentive fee. External Commercial Borrowing (ECB) Hospitality Sector is eligible borrower. They can avail External Commercial Borrowing (ECB) facility up to US $ 200 million during the financial year for setting up new hotel projects or for meeting foreign currency and/or rupee capital expenditure. The proceeds should not be used for acquisition of land. Indian companies in the hotel sector (with total project cost of INR 250 crore or more), irrespective of geographical location, avail ECB’s for repayment of Rupee Loans availed of from the domestic banking system and/or fresh rupee capital expenditure under automatic route subject to 75 percent of average annual export earnings realized during the past three financial year or 50 percent of the highest foreign exchange earnings realized in any of the immediate past three financial years, whichever is higher.
Hospitality Development and Promotion Board
Construction of hotels is primarily a private sector activity which is capital intensive and has a long gestation period. The constraints being faced by the hotel industry in addition to the high cost and limited availability of land is the procurement of multiple clearances / approvals which are required from the Central and State Government agencies for hotel projects. In some cases as many as 65 or more clearances/approvals are required by hotel projects which vary from State to State. The often cumbersome process involved in obtaining multiple clearances for the hotel projects results in: • Delay in implementation of the project. • Cost escalation making the project less profitable and often unviable. • Discourage Promoters for investing in such projects. • In some instance, the project is stopped midway and re-
SEPTEMBER 2013
the management accountant
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