RBI takes hotels out of banks' real estate exposure to facilitate lending

The Reserve Bank of India (RBI) has notified that hotel ventures run by the entrepreneurs themselves be taken out of the real estate exposure for banks so that they become eligible for loans on the lines of infrastructure projects.

This new relaxation would enable hotels to avail larger credits at better interest rates, which would help to lower the overall cost of such hotel projects, a government press release said.

The ministry of tourism had actively taken up the issue with the ministry of finance  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 release noted.

The hotel business is highly capital intensive in nature and has a long gestation period unlike other segments of the tourism industry, the release said, adding, thje country faces a 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, it noted.

Hotels could also avail of external commercial borrowings (ECB) of up to $100 million in a financial year and with the recent announcement of RBI de-linking hotels from commercial real estate, hotels would be able to seek capital loans from banks and ease out the liquidity issues, particularly to the new hotel projects.