More correctly known as McLeod Ganj, it suffers from the same traffic jams, wail of car horns, construction work and stinking piles of rubbish that afflict India’s largest cities.
Dharamshala’s scant resources are being stretched to bursting point by a huge rise in visitors as domestic Indian tourists pour into the cramped streets to join pilgrimage groups from across Asia and young Western backpackers.
For those who remember the sleepy hilltown where India provided a safe haven for Buddhist leader the Dalai Lama and his followers fleeing China after 1959, the modern reality is often ugly and depressing.
“Before, there were virtually no private vehicles, so everyone would walk up and down the steep mountain paths,” said Tenzing Sonam, a well-known film-maker who first lived in Dharamshala 35 years ago.
“The town was tiny and there was a close-knit community of the generation who first fled Tibet and their children. Everyone knew everybody.
“The place felt very cut-off from the rest of India, and the only visitors were a small number of the hippies and Buddhist seekers.”
As hotels, restaurants and car parks sprout from sites excavated into the hillsides, Dharamshala’s image as a sanctuary from religious persecution and a place for quiet contemplation are fading.
“It is hard to be critical as people benefit from the economic activity, but it is impossible to expand like this on the side of a mountain,” said Sonam, 53, whose parents were close associates of the Dalai Lama’s family in Tibet.
“Most upsetting is the unplanned and illegal development, with laws about height and position flouted due to bribes being paid. If that is not fixed soon, the place will be destroyed.”
Sandal-wearing monks in saffron robes and Tibetan women wearing long dresses remain a striking feature of the town, but they are increasingly swamped by four-wheel-drive vehicles squeezing past open drains and bars selling beer and pizza.
At Chonor House, a boutique hotel where actor and devout Buddhist Richard Gere is a regular, one sign of Dharamshala’s creaking infrastructure is bath tubs being replaced by showers to save on scarce water.
“There is so much construction going on,” said manager Karma, who only uses one name.
“All the hotelsare booming, and water is becoming a serious issue.”
Karma says most of his guests are couples from the United States, Britain and Germany, while tour groups of Japanese, Thai and Vietnamese pilgrims stay in bigger hotels nearby.
“We need a generator because of power cuts, and the roads are rough here because they get washed away by the monsoon,” Karma added.
The winding route up to the town is crumbling and congested, while pedestrians walking along the two narrow streets of McLeod Ganj in the busy summer months are assailed by noise and fumes from vehicles.
Rubbish disposal is also a serious challenge, with much refuse simply dumped off the side of roads, spoiling the enjoyment of walkers who head up forest tracks towards soaring peaks behind the town.
According to the Himachal Pradesh state tourism department, last year 1,800,000 Indians and 99,000 foreigners visited the district of Kangra – which includes Dharamshala – a sharp increase on the figures from 10 years ago.
“The new popularity is due to people coming to enjoy the cool climate when the plains are hot, adventure sports such as mountaineering and religious places of interest,” said Kangra deputy director for tourism Ashwani Sood.
“People enjoy these things, and we want more visitors to come and experience them too.”
The town’s new role as a popular weekend get-away for young crowds from New Delhi and Chandigarh has been underlined by Indian Premier League (IPL) cricket games played each year in the nearby stadium.
After the most recent matches in May, drunken mobs of travelling fans from neighbouring Punjab state gathered in the tiny main square of Dharamashala, clashing with police and throwing bottles at bars that refused them entry.
Such scenes appalled many Tibetan exiles, who fear that long-standing relations with local Indian communities may been threatened by increasing commercialisation. AFP