how to get output of grep command (Python)

Try that :

import subprocess
hosts = subprocess.check_output("grep 'host:' /root/test.txt", shell=True)
print hosts

Your code should work, are you sure that the user has the access right to read the file?

Also, are you certain there is a "host:" in the file? You might mean this instead:

hosts_process = subprocess.Popen(['grep','host:',file_input], stdout= subprocess.PIPE)
hosts_out, hosts_err = hosts_process.communicate()