India’s hospitality sector poised for considerable growth in 2025

V Nagarajan

The year 2024 unfolded as a powerful reminder of the world’s dynamic nature, a blend of geopolitical shifts, climate extremes, and economic recalibrations. While India’s inbound tourism recovery remained slower than expected, the hotel sector performed strongly across all key performance metrics.

The sector closed the year with a nationwide occupancy of 63-65 per cent, average room rates (ARR) ranging between Rs7,800-8,000, and revenue per available room (RevPAR) in the range of Rs5,000–5,200, reflecting a 27–29 per cent increase over pre-COVID benchmarks, according to Anarock survey.

Encouraged by this growth, hoteliers accelerated development activity, resulting in a historic high in hotel brand signings, surpassing previous records, with a sharp focus on Tier-2, Tier-3, and emerging leisure markets. The outlook for India’ s hospitality sector in 2025 is not just optimistic; it’s electric. The year kicked off with momentum as C oldplay’s sold-out concerts in Mumbai and Ahmedabad drew fans from across the country and abroad, highlighting India’s growing prominence on the global live events circuit.

Soon after, the Maha Kumbh Mela in Prayagraj, which welcomed 66 crore visitors over just 45 days, showcased the unmatched scale of India’s religious tourism segment, emphasising the country’s capacity to host some of the largest gatherings in the world. This momentum is expected to continue driven by vibrant calendar of cultural and sporting events, and the continued influx of travellers to spiritual destinations such as Ayodhya, Kedarnath, and Varanasi, and the growing appeal of wellness and medical tourism. At the same time, the branded economy hotel segment, which accounts for just 5–7% of total supply, is emerging as a high-potential growth. Encouraged by the current momentum, it is expected that the nationwide occupancy may reach 70% and average room rates (ARR) to cross the Rs10,000 mark in 2026.

However, to fully capitalise on this growth trajectory, long-awaited policy reforms must be prioritised. Granting industry and infrastructure lending status to hospitality projects, irrespective of investment size, is crucial to unlocking new development in underserved and emerging markets. With rising domestic demand, increasing global visibility, and a new era of experiential travel, India’s hospitality sector is no longer just growing, it’s gearing up to lead the world.

India’s hotel sector is poised for considerable growth in 2025, building upon the strong momentum of the two previous years. This expansion is driven by a thriving domestic tourism market, the rise of niche travel segments, a steady revival in inbound tourism, and significant infrastructure enhancements. With domestic travel continuing its upward trend, increased spending and demand are set to accelerate the sector’s development, further solidifying India’s standing in the global hospitality industry.

FY26 Union Budget, the government announced an outlay of Rs2,541.06 crore for tourism initiatives for FY26 and is also planning to establish 50 new tourism destinations within the country.

In parallel, India’s commercial office space market is experiencing a notable upswing, contributing significantly to hospitality growth. In 2024, gross leasing reached 89 million sq. ft., with net absorption at 50 million sq. ft. across major cities. The momentum continues into 2025, with leasing activity up 14-16 per cent year-on-year in the top seven cities.

Global Capability Centres (GCCs) are emerging as key demand drivers, alongside the continued strength of the IT/ITeS sector and rapid expansion of startups in fintech, health-tech, and e-commerce. That said, the evolving global trade and tariff landscape could influence cross-border travel sentiment and is a factor to monitor in the near term. Sustained collaboration between the government and private sector will be critical to navigating these dynamics and securing India’s place as a leading global travel destination.

I have inherited a property from my uncle in Pune. What are the tax implications while selling it and repatriating the sale proceeds? Santosh Rane, Sharjah.

As per regulations, there is no tax on inheritance of property in India by NRIs. As regards taxation, if the holding period exceeds 24 months it will be long-term gain and taxed at 12.5 per cent without indexation benefits. While selling the property, the buyer is required to deduct TDS at 12.5 per cent. If the actual tax liability is lower than 12.5 per cent, you can apply to the assessing officer for a lower TDS. You are permitted to repatriate upto $1 million per financial year on submission of required documents.

Can I invest in a residential property along with a resident relative in India? Are there any restrictions? Sunil Abraham, Dubai.

There are no restrictions for joint investment but there are certain ground realities you should follow. If you are paying your share through forex, you should make direct payments to the builder as clubbing it with your co-owner in India would pose formidable challenges to convince the concerned authorities while repatriating at a later date.