Hotel Industry Demands Infrastructure Status to Avail Easier credit

June 26, 2009	(Be the first to rate this story!)  Loading ...
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India’s hotel industry has asked the government to grant it infrastructure status and de-link it from the real estate sector to avail of easier credit, an industry body said, ahead of the federal budget in July. It has sought a special package for this sector delinking it from real estate business and linking it with small and medium enterprises sector for priority lending, Federation of Hotel & Restaurant Associations of India (FHRAI) said in a statement. “We also wish for grant of infrastructure status to the hotel industry,” FHRAI said, adding hotels should be bought on par with other infrastructure projecs like airports, highways and power projects.

The Reserve Bank of India at present classifies loans to the sector as a commercial real estate exposure resulting in higher interest rates and non-priority status for financial assistance. However, analysts say this alone will not be enough to ensure easier access to credit for the beleagured sector. “Ultimately, bankers would only take a call based on the strength of the borrower and all these things will not necessarily increase the flow of credit,” Crisil’s head of research Sridhar Chandrashekar told Reuters. “The concern for the hotel sector is larger in nature. More importantly, it has to do with the demand-supply scenario,” he said. Weak corporate spending in the wake of the global financial meltdown and the terror attacks in Mumbai last year have led to a fall in occupancy levels of most hotels.

Occupancy levels have fallen to around 63 percent in the first four months of 2009 from 78 percent a year ago, according to Crisil. Faced with falling occupancy and wary bankers the industry has also approached the government for certain tax concessions. “We want the central government to pass direction to the state governments that luxury tax should be standardised in all states. They should also issue directions for an uniform VAT (value added tax),” said SP Jain, managing director of the Pride Group of Hotels.

The industry is asking for a 4 percent luxury tax on actual room tariffs as well as uniform sales tax on food & beverage and excise duty on liquor, said Jain, who is also a executive member of FHRAI. The sector has also sought higher depreciation allowance of 20 percent on their buildings, from the current 10 percent. “The additional depreciation…may also be allowed to hotels which have to make heavy investments in plant and machinery due to their running on a 24-hour basis,” FHRAI said.

News Published Under:   Hotel Industry in India |

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