A look at how hotel loan/lending segment will evolve in a disruption-filled world

India's tourism sector is experiencing a multi-faceted boom with travellers exploring diverse interest areas, ranging from historical sites to wellness retreats. This expansion is creating new opportunities for varied travel experiences across the nation, extending beyond traditional tourist destinations.

Major growth drivers

Religious tourism is experiencing strong growth, particularly in India, with significant increases in both domestic and international visitors to religious sites. 

Uttar Pradesh saw a significant surge in tourism in 2024, recording a massive 649 million tourist arrivals, an increase of over 170 million from 2023. This growth is largely driven by its key religious sites, including Ayodhya, Varanasi, Prayagraj, and Mathura.

The inauguration of the Ram Mandir in Ayodhya has notably boosted the state's tourism. By June 2025, the temple had already welcomed over 55 million devotees since its consecration ceremony in January 2024.

Further contributing to this momentum was the Maha Kumbh Mela 2025 in Prayagraj, which concluded in February 2025. This colossal religious gathering attracted over 650 million pilgrims, who took a holy dip at the Triveni Sangam.

Beyond Uttar Pradesh, religious circuits in other northern Indian states also continue to draw large numbers. Uttarakhand's Char Dham Yatra remained a popular route, attracting 4.545 million pilgrims in 2024, while Himachal Pradesh also offers several popular religious circuits.

The grand cultural heritage and rich history of Rajasthan continues to be a major draw for international tourists. Last year, the state welcomed 2.3 million foreigners, a 21.92% increase compared to 2023. Rajasthan also recorded 230 million domestic tourist arrivals in 2024 a 28.50% increase compared to domestic arrivals in 2023, reflecting its enduring popularity among Indian travelers. This growth underscores the strong appeal of its royal heritage and desert landscapes.

Himachal Pradesh saw 18 million Indian tourists and 83,000 foreigners visit the state in 2024. This reflects the appeal of winter sports like skiing and snowboarding, as well as adventure activities such as paragliding, mountain biking, and rock climbing. Uttarakhand and Sikkim also offer numerous adventure opportunities, ranging from trekking and white-water rafting to paragliding, mountaineering, and other winter sports.

Monsoon tourism is on the rise in states like Meghalaya, Karnataka, and Kerala, where lush green landscapes and waterfalls during the rainy season draw nature enthusiasts. Meghalaya, known as the “Abode of the Clouds”, received 2892.4 mm of rain in 2024, adding to its unique allure.

Meanwhile, Bangalore and Pune are known as education hubs, with a multitude of schools and universities attracting students and academics globally. In 2024, the Indian government issued over 45,445 student visas to foreign nationals.

Medical tourism is also flourishing, with Tamil Nadu and Kerala being top choices. India issued 463,725 medical visas in 2024, with Kerala's traditional medical practices like Ayurveda particularly appealing to tourists from Southeast Asian and Middle Eastern countries.

Rural tourism is gaining traction in states such as Punjab, Maharashtra, Madhya Pradesh, and Haryana, offering visitors a chance to experience farming and tranquil village life. For instance, Madhya Pradesh saw 134.1 million visitors in 2024, a 19.6% increase from 2023, thanks to its rural tourism initiatives, which include 63 tourism villages and over 470 homestays that hosted more than 24,000 visitors.

 

Bullish sentiments

The tourism sector in India is changing positively. In 2023, India had 2,509 million domestic tourist visits and 9.52 million foreign tourist arrivals. The tourism industry is expected to add ₹22 trillion to India's GDP by 2025. This growth across different types of tourism means more lending chances for hotel buildings, moving beyond big cities to religious towns, unique spots, and growing tier-2 and tier-3 cities.

 

Transition in supply-demand paradigm

From April 2025 to March 2031 (FY26 to FY31), the number of hotel rooms is projected to increase by 7% annually, while demand for rooms is anticipated to grow by 10.1% each year. With high hotel room prices and an expected 78% occupancy rate, this gap creates a favourable environment for lenders, making hotels appear to be a lower-risk investment with improved loan options. By 2029, India's star category hotel rooms are expected to exceed 300,000, up from the current 200,000. However, this is considerably less than in other global markets; for example, India has nearly 24 times fewer branded rooms than the United States. This difference highlights a substantial opportunity for growth, necessitating a re-evaluation of risk and value by hotel investors and lenders.

Diversification by Region and Specialized Markets

The next step for hotel financing will involve expanding beyond the big markets. Money will need to go into religious towns, tourism centres, and upcoming smaller cities. These places have different income and demand patterns than regular hotel hubs, so lenders need to create financial plans just for them. Also, growth in areas like medical tourism, heritage tourism, and wellness travel is creating new types of hotel projects. Each of these has different customer patterns, income timing, and risk levels.

Market Expansion and Demographic Dividend

India's growing population is another reason for changes in hotel lending. More people are expected to travel within the country as the middle-class is expected to grow from 432 million in 2021 to an estimated 715 million by 2031, possibly reaching a billion by 2047. India's youth, 371 million people between 15 and 29, are comfortable with technology, move around a lot, have more money to spend, and like to travel. This changing group of consumers will shape how hotels are built, where they are located, and how they are financed in the next ten years.

Role of TFCI

Tourism Finance Corporation of India Limited (TFCI) is a premier public financial institution established in 1989, presently regulated by RBI as NBFC-ML-ICC, focused on providing finance to the tourism, realestate, manufacturing, social infrastructure- educational institutions, hospitals, renewable (solar & wind) energy, logistics, etc. sectors in India. Besides, TFCI provides finance to non-banking and housing finance companies for secured onward lending. TFCI also provides loans to corporates and HNIs against the security of listed category-I shares.