Ahead of the Commonwealth Games, which is expected to see a major shortage of hotel rooms in the country, RBI on Tuesday relaxed the norms for credit off-take for the hospitality sector. Under the new guidelines, hotels have been taken out of the real estate exposure for banks.
For the sector, which has been reeling under the impact of the global economic crisis and has seen several developers put their hotel projects on the backburner, the announcement means that credit availability will be easier along with a lower rate of interest which could lower the overall cost of the project. The sector has for the past many months now been asking for an infrastructure status.
However, the rider in the guidelines is that it will be applicable to “those entrepreneurs who themselves run these ventures”. A majority of the total hotels in the country and over 60% of the upscale and mid-scale hotels are under management contracts with international hospitality chains, which are responsible for running the operations of the hotels.
Some of the largest hotel chains in the country are under partnership with international brands like InterContinental, Hyatt and Trident among others. “If the new guidelines restricts the relaxed norms to only hotels that are run by their owners, then it will benefit the standalone, smaller properties that are owned and run by the same company,” said Manav Thadani HVS Hospitality Services.
LP Aggarwal, chief general manager, credit, Punjab National Bank told FE that the bank has provided loans worth Rs 2,000 – 3,000 crore to the hospitality sector and this portion will now come out from the loans under the real-estate sector. He added that more than the loans becoming cheaper for the hospitality sector, they will become easier to avail. “Several times, hotels were not able to avail loans as the limit for credit for the real-estate sector used to be full,” he said.
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