Tourism Finance Corporation of India (TFCI) is targeting loan sanctions of around ₹3,000 crore in the ongoing financial year (FY27), up from more than ₹2,000 crore in FY26, driven by robust demand for hotels and resorts in small cities amid a domestic tourism boom, managing director and chief financial officer Anoop Bali said.
The non-bank lender expects nearly ₹500 crore of the proposed sanctions to come from smaller cities and emerging tourism destinations, where branded hotel chains are expanding rapidly to cater to rising leisure, business and religious travel.
"We are projecting sanctions of around ₹3,000 crore this financial year. Nearly ₹500 crore should come from smaller cities," Bali told Mint in an interview.
The non-banking financial company (NBFC) also expects its assets under management (AUM) to rise to around ₹2,800 crore by the end of FY27 from around ₹2,200 crore at the end of FY26.
Domestic demand
Bali said India's hospitality sector remains resilient despite geopolitical uncertainties, as growth is being driven primarily by domestic tourism.
"Post-Covid, tourism growth has largely been driven by the domestic market. Young Indians are travelling more, premium travellers are opting for luxury hotels, and occupancies remain healthy across leisure destinations, business centres and tier-I as well as tier-II cities," he said.
At 9:25 am on Monday, shares of TFCI traded at ₹90.61, up about 4%, on the BSE.
According to Bali, India currently has around 200,000 branded hotel rooms, while annual additions of only 15,000-20,000 rooms remain well below expected demand, leaving significant headroom for investments over the next three to five years.
"The sector should continue to perform well over the next three to five years," he said.
Bali said most greenfield hospitality investments are now shifting beyond metros.
"A lot of resort development is happening in new destinations, which are largely in tier-II and tier-III locations. Hotel chains are launching new brands and expanding into cities where they previously had no presence," he said.
Besides conventional tourist destinations, he expects religious tourism, northern states and emerging destinations in eastern India to present fresh investment opportunities.
However, Bali identified rising project costs as the biggest challenge facing hotel developers.
According to him, hotel construction costs have increased by 15-20% because of supply-chain disruptions, higher material prices and shortages of skilled labour.
"The concern is not demand, but rising development costs. Hotels under construction may face cost overruns because of higher material and labour costs," he said.
TFCI has significantly diversified its portfolio over the past two years, with tourism now accounting for around 50% of its loan book.
The remaining portfolio comprises lending to residential real estate, manufacturing, educational institutions, renewable energy projects and smaller NBFCs.
For FY27, the company expects around ₹900 crore of its loan book to be in residential real estate and ₹600-700 crore in manufacturing, while also expanding lending to schools, colleges and MSME solar projects. Bali said TFCI is also evaluating opportunities in data centre financing but has not yet entered the segment.
The company reported a net profit of ₹61.2 crore in the April-June quarter (Q1) of FY27, supported by higher interest income from an expanding loan book and an income-tax refund relating to earlier assessment years.
Asset quality remained healthy, with a recovery efficiency of 99.6% and only one special mention account (SMA) during the June quarter.
Bali said the regulatory framework for NBFCs remains supportive but called for measures to reduce their cost of funds.
"NBFCs continue to borrow at a higher cost than banks. If funding becomes cheaper, we can pass on lower borrowing costs to customers," he said.
He also sought further rationalisation of the goods and services tax (GST) structure for the hospitality sector, saying the existing tax regime creates anomalies for premium hotels despite earlier reductions in GST rates for certain categories of accommodation.