"Currently hotels are clubbed along with real estate business as speculative, which does not entitle it to priority lending by banks," the Federation of Hotel & Restaurant Associations of India (FHRAI) said in a statement.
Non-priority lending by banks and institutions at higher interest rates leads to higher project cost and room rates, it said.
"We have asked the hospitality sector to be given infrastructure status. This industry is a high-capital-base industry," said S.P. Jain, managing director of the Pride Group of Hotels. "The central bank has classified hotels under the real estate sector. Banks are asking for very high rate of interest. We want to be removed from the real estate category," said Jain, who is also a executive member of FHRAI.
The hospitality sector, hit by the economic downturn and the terrorist attacks in Mumbai on 26/11 last year, has seen cancellations and a fall in occupancy levels to below 50%.
Occupancy rates are likely to fall to 62 percent in 2008-09 from 72 percent in 2007-08, rating agency Crisil's head of research Sridhar Chandrashekhar said. They are expected to fall to 47 percent in 2009-10 and would begin to recover only at the end of 2010-11, he added.
The wilting industry has sought tax incentives as given to service exporters to increase hotel capacity and tourism infrastructure.
The hospitality sector needs 400 billion rupees to create an additional 150,000 rooms, ahead of the Commonwealth Games in 2010. According to FHRAI estimates, 10 million foreign tourists are expected to arrive by 2010.
The industry is also seeking extension of a five-year "tax holiday" to 10 years for all categories of hotels throughout the country.
The tax holiday was introduced in 2007-08 to cover hotels up to the 4-star category in the National Capital Region for the Commonwealth Games. The benefit was extended to hotels in several other regions of the country in 2008-09.
The industry body has also sought rationalization of taxes such as luxury tax and sales tax, levied by state governments. |