NEW DELHI: With the country facing a significant shortage of tourist accommodations, a Parliamentary panel has recommended relaxation in floor area ratio (FAR) to facilitate hotel construction in states with tourism potential. FAR norms are used for determining the maximum permitted structure size on a piece of land.
The panel has also suggested fast-track rationalisation of licensing requirements to bring approvals below 20 within two years and repeal obsolete regulations. The panel has also suggested abolishing or replacing the Sarais Act, a British-era law that mandates registration for inns and guest houses.
In its latest report submitted to the Parliament, the Rajya Sabha standing committee on transport, tourism and culture also asked the Ministry of Tourism to coordinate with state governments to address hotel capacity constraints and include a hotel capacity augmentation component in the National Mission for 50 Globally Competitive Destinations. The panel has made over 40 recommendations to give impetus to the tourism sector.
The 31-member committee, headed by Janata Dal-United (JDU) MP Sanjay Jha, further urged the ministry to place periodic progress reports in this regard in the public domain.
Highlighting the demand and supply gap in hotel rooms, the Committee noted that the country currently has around 1.8 lakh branded hotel rooms and about 15,000 units in unbranded properties. According to the industry estimates, the country needs to at least double this capacity.
The panel further observed that the acute shortage of hotel rooms leads to a sharp surge in tariffs, with prices reaching as high as Rs 12-13 lakh per night during major events. In contrast, competing international destinations such as Bangkok continue to offer accommodation in the range of Rs 25,000-45,000 per night even during peak periods, pointing towards India’s pricing competitiveness.
In its submission, the ministry informed the committee that tourism has been included for the first time in both central and state-level ease of doing business frameworks, and the NIDHI+ (portal of national integrated database of hospitality industry) has recorded 55,414 registered accommodation units as of January 2026.
Industry representatives who termed the recommendations as a welcome step, however sought a comprehensive policy push further. The general secretary of Federation of Associations in Indian Tourism & Hospitality (FAITH), Rajiv Mehra, said that relaxed FAR norms are a positive step, and it could enable hotel developers to optimise existing land parcels and add more rooms, thereby partially easing supply constraints.
"However, this alone will not be enough. What the sector urgently needs is a more comprehensive policy push. Granting industry status to tourism and hospitality would significantly improve access to affordable financing, encouraging fresh investments. Equally important is the need to streamline and rationalise the multiple clearances and approvals that currently hinder project execution and delay capacity creation,” Mehra said.
He added that Average Room Rates (ARRs) within India remain elevated, largely due to a structural supply gap. "The country currently has, by industry estimates, only about half the hotel room inventory it requires. When future growth is factored in, the gap becomes even more pronounced. The pace of greenfield hotel development has not been sufficient to meet rising demand," he said.