India’s alternative accommodation sector, including homestays and service apartments, is projected to reach a gross booking value of ₹41,500 crore by FY29. Driven by growth in smaller cities and corporate adoption, the segment is outpacing traditional hotel expansion. Investors should, however, note the regulatory risks, including local licensing norms and tax compliance, which could influence future growth.
The market for alternative accommodations in India, comprising homestays, vacation rentals, and service apartments, is showing strong growth. Forecasts indicate the segment will reach a gross booking value of ₹41,500 crore by FY29, expanding at a yearly rate of 21.2%. This growth is currently faster than the broader travel market, as travelers increasingly prefer the flexibility and cost-effectiveness of these options over traditional hotel rooms.
The supply of these properties has grown significantly, with digitally listed properties reaching 215,000 by FY26, up from 102,200 in FY23. This expansion is moving beyond major tourist hubs. Smaller cities such as Indore, Ghaziabad, and Ayodhya are seeing an influx of inventory, helping bridge the infrastructure gap in regions where traditional hotel supply has struggled to keep pace with demand. Furthermore, corporate travelers accounted for roughly 19% of room nights in FY26, as companies look for accommodations that offer combined living and workspaces.
While the expansion is driven by technology and digital booking platforms, the sector faces distinct risks. Investors should consider that the alternative accommodation space is subject to evolving regulatory scrutiny. Several state governments and local authorities have previously raised concerns regarding safety, noise, and the impact on local housing availability, leading to stricter licensing requirements in some tourist hotspots. For example, places like Goa have witnessed debates over the regulation of unlicensed homestays.
Additionally, there is a push for higher financial formalization. As tax authorities tighten norms around GST compliance for short-term rentals, the informal nature of many small property hosts could face pressure. Any shift toward stricter policy enforcement—such as mandatory registration, fire safety compliance, or operational caps—could increase costs for hosts and, by extension, impact the margins and inventory availability for the booking platforms involved.
In terms of market competition, traditional hotel chains like Indian Hotels Company (IHCL) and Lemon Tree Hotels continue to focus on brand consistency and service quality to retain their customer base. Meanwhile, online travel aggregators like MakeMyTrip and EaseMyTrip benefit from the increasing transaction volumes in the alternative segment. The ability of these platforms to maintain a balance between aggressive expansion and strict regulatory compliance will be a key factor to watch. Moving forward, investors may track how policy changes in major states affect the supply of listed properties and whether platforms can successfully transition hosts toward more professional, tax-compliant business models.