by The Himachal Pradesh real estate landscape has changed dramatically in 2025 due to the state government’s crackdown on unregistered homestays and, most critically, a clear ban on non-Himachali homeowners running homestays in properties bought through legal relaxations. If you’re a property investor or an aspiring Airbnb host from outside the state, understanding these rules is now essential for protecting your investment, maximizing returns, and staying compliant with local regulations.
What Does “Homestay Ban for Non-Himachali” Really Mean?
In October 2024, the Himachal government’s Cabinet sub-committee recommended a sweeping restriction: Non-Himachalis who purchased land in the state under special relaxation (Section 118), intended for personal residential use, are not permitted to operate homestays on these properties. This restriction has been adopted as part of broader reforms targeting illegal hospitality operations and leveling the playing field for local hoteliers and hosts.
- If you are a non-Himachali and bought property after seeking relaxation under Section 118 for self-use, you cannot legally register or operate that house as a homestay or Airbnb.
- Only Himachali residents or outsiders who own built-up units within strict urban or municipal boundaries (and not on land acquired for self-use) can apply for homestay registration, subject to new rules.
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Why Did The Government Impose This Ban?
1. Prevent Commercial Misuse
Section 118 relaxations were meant to let outsiders buy small residential plots or homes for personal use only, not for rental, tourism, or profit. Many investors circumvented this rule by informally running Airbnbs or homestays, disrupting the legal intent.
2. Protect Local Hosts & Hoteliers
With thousands of informal Airbnbs undermining registered homestay businesses and hotels, local host associations and hoteliers voiced serious concerns over tax leakage and unfair competition. The government has now moved to ensure that only bona fide residents or those qualifying under specific conditions can benefit commercially.
3. Regulate Growing Homestay Boom
With the explosion of Airbnb listings in Himachal, especially after 2020, the state needed mechanisms to regulate quality, safety, and taxation—and maintain the ecological balance across popular hill stations.
What Are the Current Homestay Regulations (2025)?
- Mandatory Registration: All homestay units (urban or rural) must be registered with the Himachal Department of Tourism & Civil Aviation.
- Eligibility: Homestays can only be set up by bona fide Himachali residents, or those with property titles that are not Section 118 relaxations for personal use.
- Strict Penalties: Non-compliance incurs a ₹1 lakh fine, disconnection of utilities for repeat offenders, potential property sealing, and criminal liability.
- No NOC Needed: NOCs from police or panchayat are no longer required; applications are accepted via an online portal with a structured fee system.
- Commercial Utility Rates: Registered homestays within municipal/planning limits pay commercial rates for electricity and water, while rural ones may get domestic rates.
- Limited Property Types: Only housing units with valid land title and municipal approval are eligible for homestay licensing. Leased flats or unregistered units cannot operate legally as homestays.
Impact on Non-Himachali Investors
1. No Homestay/Airbnb Business on Residential Plots
If you purchase property as a non-Himachali through the Section 118 relaxation pathway, the property can only be used for your family’s private use—you cannot legally host guests for profit, nor list it as an Airbnb or homestay.
2. Rental Returns Severely Restricted
Many out-of-state buyers invested in Himachal hoping to generate passive income via the booming tourist rental market. The new rule renders such plans illegal for most new non-Himachali buyers, shrinking expected yields.
3. Asset Liquidity Takes a Hit
Properties bought under Section 118 for “self use only” are now harder to sell to future investors, as commercial let-out via homestays is prohibited.
4. Existing Unregistered Units at Risk
Many illegal homestays/Airbnbs run by outsiders face imminent closure, fines, and potential blacklisting from the state registry. The government has started mass enforcement drives as of August 2025.
How Can Non-Himachalis Still Invest Legally For Rental Income?
a. Buy Built-Up Properties in Municipal Limits Only
Some apartments, villas, or flats within designated municipal areas are eligible for rent-out if you follow all registration rules. These still require clear titles and cannot be converted from “self-use only” status. Read our blog: “Complete Guide: Which Areas Can Non-Himachali Buyers Purchase Without Special Permission?”
b. Partner with Local Himachali Families
Some investors opt for joint-venture models, partnering with Himachali hosts in rural or semi-urban areas. Here, the local partner legally owns and operates the homestay, while the outsider offers funding or expertise.
c. Invest in Earlier Registered & Approved Homestays
Homestays registered prior to the new law, with valid documentation and continuous registration, may retain legal status—provided no ownership structure changes.
Official Documents and Fines: Key Points
- ₹1 Lakh Fine for illegal operations; repeat violations can lead to disconnection of electricity and water.
- Mandatory display of registration certificates at the property and in online listings.
- Annual or three-year renewal of licenses is now enforced, with the Tourism Department monitoring compliance.
- Separate rate slabs for taxes, GST registration for larger units, and minimum wage requirements for employed staff.
- Gender and remote area discounts for women entrepreneurs and rural hosts—but only for eligible residents.
Non-Himachali Homestay Ban (2025)
| Topic | Can Non-Himachali Do This? | Legal Route? | Key Caveat |
|---|---|---|---|
| Buy house for private use | Yes | Section 118 relaxation | No homestay or Airbnb allowed |
| Register new homestay in own name | No | Not allowed | Only bona fide Himachalis/urban units |
| List property on Airbnb | No | Not allowed | If Section 118, commercial ban applies |
| Run homestay in joint venture | Sometimes, with local partner | Only if Himachali is owner | Ownership and licensing must be compliant |
| Continue old registered homestay | Maybe (case-by-case) | Allowed till renewal | Must comply with new registration rules |
How Does This Affect Himachal’s Real Estate Market?
- Higher demand for ready-built flats in select urban centers that remain eligible for legal short-term letting.
- Premium on city areas like Shimla and Manali where non-Himachali investment still offers potential rental returns in select developments.
- Local Himachali hosts benefit from reduced external competition, higher occupancy, and support programs through the new policy.
Practical Tips For Non-Himachali Buyers in 2025
- Always verify the title and usage status of the property—avoid hidden “self use” only clauses.
- Do not invest in rural or new plots with hopes of turning them into hosting ventures.
- If buying for rental yield, choose only pre-approved urban apartments or partner with reputed local families in registered joint ventures.
- Stay updated on the latest tourism and homestay rules, as the legal landscape is evolving rapidly.
- Work with legal consultants and property advisors who understand nuanced registration conditions.
For a deeper guide to legal purchase zones, read our blog: “Complete Guide: Which Areas Can Non-Himachali Buyers Purchase Without Special Permission?”. Interested in short-term rental trends? See: “Airbnb Boom in Himachal: Top Investment Destinations for Non-Himachali in 2025”.
Conclusion: The Bottom Line for Out-of-State Investors
Himachal’s new homestay rules do not allow non-Himachali property owners to operate homestays or Airbnbs on land or homes acquired through Section 118 for self-use. Trying to bend the law now carries serious penalties, risks your investment, and can lead to permanent disqualification.
If your goal is second home enjoyment, proceed—but for rental income, search only in specific municipal flats or partner transparently with locals. The regulatory message is clear: hosting in Himachal is now the privilege of Himachali residents and strictly regulated urban owners. Stay informed, invest wisely, and always consult local legal experts before making your move
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