Rescue workers retrieved several people left trapped under tonnes of debris after the building collapsed in a crowded neighborhood of Indore on Saturday night.
"We pulled out 12 people from under the debris. Ten of them have died," police inspector Sanju Kamle told AFP.
Local media reports said the collapse took place after a car drove into the building's front portion.
"We are investigating. At the moment it is difficult to say how it collapsed," Kamle said.
The hotel with 25 rooms was located in the commercial hub of Indore, close to railway and bus stations. Indore is nearly 900 kilometers (560 miles) south of New Delhi.
Building collapses are common in India as builders try to cut corners by using substandard materials, and as multi-story structures are erected with inadequate supervision. The massive demand for housing around India's cities and pervasive corruption often result in builders adding unauthorized floors or putting up illegal buildings.
In August 2017, 33 people were killed when an apartment building collapsed in India's financial capital of Mumbai.