NITI Aayog lays out policy roadmap to promote homestays in India

NITI Aayag has proposed fiscal incentive, streamlining of registration and renewal processes and digitalisation of homestay operations to help states build a resilient and inclusive ecosystem for homestays in the country as India banks on tourism for employment generation and regional economic growth.

“As one of the most dynamic sectors of the economy, tourism plays a significant role in generating employment and contributing to national income,” the Aayog said in its report ‘Unlocking the Economic Potential of Homestays’, released on Friday.

“It is proposed to have a model policy framework that states may adopt to harmonize regulations and establish a more resilient and inclusive ecosystem for homestays,” the Aayog said, adding that this framework incorporates key components designed to simplify processes, encourage wider participation, and promote sustainable tourism growth.


As part of the financial reforms, the Aayog has proposed basing financial incentives to promote tourism at the destination level rather than focusing solely on individual homestay amenities or classifications. “This will encourage operators to contribute to regional growth and attract tourists to underserved areas,” it said in the report.

Calling for a need to reduce bureaucratic hurdles and eliminate unnecessary steps, the Aayog has also suggested streamlining the registration process and creation of a unified, digital platform to integrate approvals across key departments.

“Application disposal timelines may be capped at 30 days, ensuring prompt registration and renewal processing, thereby improving service delivery and reducing delays,” it said.

“Fees and compliance requirements may be reasonable and proportionate to the size and category of the homestay, ensuring the financial viability of smaller operators,” it added.

The Aayog has called for classifying homestays as residential units for utility purposes, ensuring access to residential rates for water, electricity, and property taxes. “This will enhance the financial sustainability of homestays,” it said.

According to a report by Cognitive Market Research, the size of the homestay market in India in terms of sales revenue was Rs 4,722 crores in 2024, with a projected CAGR of 11.0% between 2024-2031.

Despite the rapid growth in tourism, India faces a significant shortfall in accommodation infrastructure, particularly in peak seasons, the Aayog said in the report.

The ministry of tourism estimates a shortage of over two lakh hotel rooms, making alternative accommodations a critical solution to bridge the gap.

“While new hotel developments require high capital investment, regulatory approvals, and land availability, homestays and B&Bs offer a low-cost, scalable alternative that can expand accommodation capacity without additional infrastructure pressure,” the Aayog added.