FDI in Hotel Industry in Nepal (2080)

Nepal has become an attractive destination for Foreign Investors looking for New Business Opportunities in South Asia and the Developing Countries Segment. As Tourism is among Nepal’s Leading Foreign Investment sectors, Hospitality and Hotel Industries have observed a growth in interest and Financing. Nepal Tourism Board has projected 1,000,000 Tourists to have arrived in Nepal from January to December of 2023, according to recent Statistics. Further, the Board has assumed that the Average Tourist Expenditure in Nepal is expected to rise to NPR 9,000-10,000 per day.

The Ministry of Culture, Tourism and Civil Aviation, National Statistics Office, and Nepal Rastra Bank have certified the findings. Therefore, the hotel industry has established itself as an attractive investment option for foreign investors. In the Fiscal Year 20/21, the Foreign Investment in the Tourism Industry, including Hotels, exponentially rose to NPR 18,000 Million. According to the Department of Industry of Nepal, more than NPR 12 Billion of Investment has been committed in Nepal in the First Half of 2023. The Nepal Hotel Association has confirmed Nepal’s Exponential Foreign Investment Surge. More than NPR 350 Billion has been invested in the Hotel Industries of Nepal.

1. Laws and Governing Bodies of Foreign Investment in Hotel Industry in Nepal

1.1 FITTA 2019

The Foreign Investment and Technology Transfer Act 2019 is the Substantive Act that has governed Nepal’s Legislative Aspects of Foreign Investment. FDI in Hotel Industries must comply with FITTA.

1.2 FITTR 2021

Foreign Investment and Technology Transfer Regulations 2021 has outlined the Procedural aspects of Foreign Investment, Repatriation, and Technology Transfer in Nepal.

1.3 Tourism Act 1978

Tourism Act 1978 was promulgated in Nepal to consolidate Legislative Provisions for the Tourism, Hotel, and Hospitality Sectors.

1.4 Hotel Association Nepal

Hotel Association Nepal, also known as HAN, is the umbrella organization with the largest conglomeration of Hotels in Nepal.

1.5 Nepal Rastra Bank

Nepal Rastra Bank is the Financial Regulatory Authority that provides the Fiscal Arrangements for bringing Foreign Investment to Nepal.

1.6 Department of Industry

The Department of Industry regulates Foreign Investment of less than NPR 6 Billion in Nepal.

2. Process of Foreign Investment in Hotel Industry in Nepal

In circumstance where the Foreign Investment doesn’t exceed NPR 6 Billion, the Application must be presented to the Department of Industry whereas for investment exceeding NPR 6 Billion, the Application must be put forrward to the Investment Board of Nepal.The Step by Step Process of Foreign Investment in Hotel Industry in Nepal is as follows:

Note: Foreign Investors have the Legal Capacity to invest 100% in the Hotel/Hospitality Project. 

3. Documents Required for FDI in Hotel Industry

The Documents required for the completion of FDI Procedure in Hotel Industry in Nepal are as follows: 

  1. Project Proposal outlining the Project Background, market aspect, technical aspect, financial aspect, details of such funds etc.
  2. Bio-Data/ Company Profile of the Foreign Investor
  3. Copy of Certificate of Registration and other Registration Documents (Memorandum of Association, Articles of Association, etc.) of the Foreign Investor.
  4. Corporate Resolution of the Foreign Investor to Invest in Nepal.
  5. Financial Credibility Certificate issued by any bank of the country of the Residence/Registration of the Foreign Investor.
  6. Documents stating the Source of Investment and Time Schedule of Investment
  7. Power of Attorney authorizing an Individual to complete the approval and Registration Process at the relevant entities.
  8. Passport of Foreign Investor in case of Foreign Investor is a person and passport of directors of foreign investor in case of Entities.
  9. Commitment Letter By Investor stating that Foreign Investor shall not repatriate investment till one year.
  10. Joint Venture Agreement (this will not be required if the Local Company will be a fully owned subsidiary or if the foreign Investor is an Individual) 
  11. Letter of Approval from the Department of Tourism

4. Charges and Fees

The Charges and Fees for FDI in Nepal have been mentioned here: Procedure of FDI in Nepal

The Charges specific to Registration of Hotel Industry are as follows: 

1. General Hotel – NPR 5,000

2. One Star Hotel – NPR 10,000

3. Two Star Hotel – NPR 20,000

4. Three Star Hotel – NPR 30,000

5. Four Star Hotel – NPR 40,000

6. Five Star Hotel (General) – NPR 50,000

7. Five Star Hotel (Deluxe) – NPR 60,000

4. Requirements for Star Hotels in Nepal

The Requirements for the Operation of Star Hotels in Nepal are as follows: 

4. Operating Modality of Hotel Industries in Nepal

Based on Location, the Hotel Industry in Nepal differs in Motels, Resort Hotels, Downtown Hotels, etc., amongst which Resort and Downtown Hotels are the most viable choices. Based on Service, Hotel Industries can be classified into International, National, and Economy Classes, where International and National Service Hotels benefit from ROI. Further, the success of foreign investment in hotel industries is contingent on its ownership. The Several Operating Models of Hotel Industries in Nepal are as follows:

  1. Franchising of Hotels
  2. Leasing of Hotels after Construction
  3. Joint Venture Hotels

In the context of Nepal, Hotels and Hospitality Industry have been classified in Stars ranging from One Star to Five Stars based on the Facilities provided to the Service-receiver by the Department of Tourism. Hotel, Lodge, Restaurant, Bar and Tourist Guide Rules, 2038 has stated that the Department of Tourism classifies a Hotel as f General Tourist Standard Hotel or Tourist Resort or one star to five star as per the facilities of that Hotel. 

A General Tourist Standard Hotel must have, at least the following Facilities: 

(a) There shall be at least ten bedrooms and natural light and air ventilation in each room.

(b) There shall be attached bathroom and toilet in Twenty Five percent room and for other rooms there shall be other necessary bathrooms and toilets in a one is to Four ratio of the rooms.
(c) There shall be arrangement of modern furniture and electricity in all rooms.
(d) All the rooms shall be decorated with reflecting the Nepalese art and culture.
(e) The material used in bathroom shall be better and standard and there shall be arrangement of enough hot and cold water.
(f) The reception counter shall be well decorated and there shall be telephone as far as possible.
(g) Dinning hall and kitchen shall be neat and clean with necessary things.
(h) There shall be good arrangement for cloth washing.
(i) Most of the senior personnel shall be experienced and able to speak English.
(j) The dress of the worker shall be neat, clean and uniform.
(k) There shall be arrangement of fan or Heater according to season.
(l) There shall be arrangement of first aid and fire fighting equipment.

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