Hotel industry seeks infrastructure status, easier credit

The hotel industry has asked the government to delink hospitality business from the real estate sector and grant it infrastructure status in order that it qualifies for priority credit.

In a pre-budget presentation to the finance ministry ahead of the 6 July budget, the Federation of Hotel & Restaurant Associations of India (FHRAI) has demanded that hotels be bought on par with other infrastructure projects like airports, highways and power projects.

The FHRA has also demanded a special package for the sector, linking it with the small and medium enterprises sector for priority lending.

Bank loans to the sector currently fall under the classification of commercial real estate credit and hence involves higher rates of interest.

The association has also sought a central government direction to state governments to standardise luxury tax rates in all states. The industry wants luxury tax to be levied at a uniform 4 per cent on actual room tariffs.

FHRAI also demanded a uniform sales tax on food and beverage and excise duty on liquor. It has also sought higher depreciation allowance of 20 per cent on their buildings, from the current 10 per cent.

The problem of the hotel sector, however, is not the availability of credit alone and the infrastructure status alone will not help it access easy credit.

The global financial meltdown and last year's terror attacks in Mumbai have combined to limit occupancy levels of most hotels.

Acceding to estimates provided by rating agency Crisil, occupancy levels in Indian hotels have fallen to around 63 per cent in the first four months of 2009 from 78 per cent a year ago.