How to Secure Project Finance for Setting Up a Hotel & Resort in India under CANARA MSME INN scheme
India’s burgeoning tourism industry presents a golden opportunity for entrepreneurs looking to set up hotels and resorts. However, the key to turning this dream into reality lies in securing the right project finance. In this blog, we will guide you through the essential steps and schemes available to obtain financing for your hotel or resort project in India.
1. Identify the Right Financial Scheme
To finance your hotel or resort project, selecting a suitable financial scheme is crucial. One such scheme tailored for the hospitality industry is the “CANARA MSME INN” scheme. This scheme is specifically designed to provide credit to MSMEs engaged or proposed to engage in the hotel industry. The scheme offers both fund-based and non-fund-based limits, along with term loans to cater to the financial needs of your project.
2. Eligibility Criteria
Before applying for finance, ensure that your business meets the eligibility criteria. Under the “CANARA MSME INN” scheme, the following entities are eligible:
Individuals/Proprietary Concerns
Partnership Firms (excluding those where HUF is a partner)
Companies
LLPs
Trusts/Societies
Additionally, your business must be registered under the UDYAM portal with a valid Udyam Registration Certificate. Note that borrowers with existing SMA1 or SMA2 status in the past year or those with NPAs are not eligible for this scheme.
3. Loan Quantum and Facility Details
Understanding the financial structure of the loan is essential for planning your project:
Loan Amount: You can secure a minimum loan of ₹10 lakhs, with a maximum cap of ₹25 crores.
Working Capital Limit: The maximum working capital quantum is ₹5 crores.
Term Loan Repayment: The loan repayment period extends up to 10 years, including a maximum moratorium period of 2 years.
4. Margin and Security Requirements
To secure the loan, you need to meet specific margin and security requirements:
Term Loan Margin: A margin of 20% on the hard cost of the project is required.
Collateral Security: A minimum of 25% of the exposure must be secured by residential or commercial property. The combined primary and collateral securities must not be less than 100% of the loan amount.
5. Rate of Interest
The rate of interest on the loan varies based on the risk rating of the borrower:
Low Risk: RLLR (Repo Linked Lending Rate) + 0.50% = 9.75%
Normal Risk: RLLR + 0.75% = 10.00%
Moderate Risk: RLLR + 1.00% = 10.25%
6. Application Process
To apply for the loan, you must provide the following:
Detailed Project Report (DPR): This document should outline your business plan, financial projections, and viability.
KYC Documents: Ensure all partners or directors have updated KYC documents.
Collateral Details: Provide the valuation report and documents related to the collateral property.
7. Additional Benefits
Under the “CANARA MSME INN” scheme, you may also benefit from concessions on upfront fees, processing charges, and commitment charges, especially if your risk rating is favorable.
Conclusion
Securing project finance for your hotel or resort in India is a structured process that requires careful planning and adherence to eligibility criteria. By leveraging the right financial schemes like “CANARA MSME INN,” you can obtain the necessary funds to bring your hospitality venture to life. Ensure you prepare a comprehensive project report, meet the collateral requirements, and adhere to the repayment terms to make your dream project a reality.
