The homestay sector grew out of state tourism programs in the 1990s and 2000s — Kerala's was among the earliest and most influential — as a way to add lodging capacity in destinations without hotel infrastructure. The model spread along the western coast, where beach towns, backwater districts, and pilgrimage sites attract travellers who value host interaction over hotel anonymity.
National policy later added a voluntary classification layer: the Ministry of Tourism grades approved homestays as Gold or Silver based on rooms, bathrooms, hygiene, safety, and host presence, while states maintain their own registration systems alongside it. For travellers, the practical takeaway is that the sector is genuine but loosely standardised — quality varies widely, and verification habits matter more than any name on a signboard.