The Delhi Development Authority will renew the lease for the Taj Palace hotel in Delhi's Chanakyapuri, giving Indian Hotels CompanyBSE 0.00 % a huge relief at a time when the fate of two of its other marquee properties — Taj Mansingh in Delhi and Taj Mahal Palace in Mumbai — hangs in balance.
The lease for the Taj Palace hotel in Chanakyapuri is to end on March 31, 2013, but IHCL sent a letter to DDA in September last year, over six months in advance, expressing its interest to renew the lease. "We have made up our mind, (to renew the lease)," a senior DDA official said, asking not to be named. He added that unlike in the Mansingh hotel case, where the lease with NDMC was to be renewed after 33 years on 'mutually agreed' terms, in the case of Taj Palace, the agreement allows IHCL, if it wishes, to extend the lease after 30 years under the same terms — a revenue share of 17.25% of annual gross revenues — for another 25 years.
"The only reason why the lease won't be renewed is if we find any violations in the terms of the lease agreement. No such violation has been found yet," said the DDA official. A spokeswoman for IHCL's PR agency said the company did not want to comment. DDA and IHCL have been engaged in arbitration over interpretation issues with respect to calculation of gross revenues, which is the basis of the revenue share.