Although the state boasts 10,000 homestays, fewer than 4,000 of these are officially registered. Originally, the government introduced homestays as a means for rural households to supplement their income, particularly those facing crop losses and declining prices. The regulations specified that only locals could operate homestays and imposed limits on the number of rooms. In Kodagu, there are 3,500 homestays in total, but only 57.1% (2,000) have received authorisation.

In Chikkamagaluru, a mere 20.1% (602) of the 3,000 registered homestays are authorised, while in Hassan, only 10.5% (210) out of 2,000 registered homestays have been granted authorisation. Uttara Kannada has the highest compliance, with 77.7% (233) of its 300 registered homestays being authorised. Additionally, in other districts, there are 2,000 officially registered homestays, of which 40% (800) are operating without proper authorisation.

Sources have indicated that homestays have proliferated in the Western Ghats without adequate regulation. In some cases, influential individuals have established resorts disguised as homestays. There are reports of encroachment on forest land, leading to damage to water sources, forests, and wildlife.

Despite repeated appeals from authorised homestay owners, the government has not taken significant action. Many unauthorised homestays are allegedly involved in illegal activities, and some have had cases filed against them. The government?s regulations are being flouted, with homestays being established in environmentally sensitive areas, resulting in environmental degradation. It is also widely known that some politicians and officials are operating homestays under assumed names.

While regulations dictate that only a limited number of individuals should be permitted to run homestays, there are instances where one person manages multiple establishments without any intervention from district authorities.

In districts like Chikkamagaluru, Kodagu, and Shivamogga, many homestays remain unregistered because they are constructed on encroached land. The tourism development committee has been pushing for homestays to obtain the necessary permissions but has struggled to identify and shut down unauthorised operations. According to guidelines, any establishment with more than five rooms should be classified as a resort. However, there is little oversight, and even those with 15-20 rooms are not being monitored for registration or GST compliance.