Sahara, which bought the Grosvenor House hotel in December 2010 for $726 million, is carrying out a due diligence of the asset and has paid an advance to the property's owners, Israel's El Ad group, a person familiar with the matter told ET.

A deal, if the negotiations succeed, will be executed through Sahara's Mauritius-based subsidiary Aamby Valley (Mauritius) Ltd.

A deal with The Plaza will confirm the Indian conglomerate's continuing fascination with overseas expansion, which has left many Sahara watchers in India curious and bemused given that the group's mainstay businesses have been finance, real estate and media.

Last year, Sahara tried - and failed - to acquire a bunch of properties in London that were put up for sale by the Marriott hotels.

Ownership of the 20-storey Plaza, which overlooks New York's Central Park and is one of Manhattan's landmark structures, could catapult the Indian group, whose main interest in hospitality now essentially involves running a hotel in Mumbai, into the super-luxury segment of the industry with two very distinctive properties under its belt.

So far, the Tata group's Indian Hotels Company, which owns the iconic Taj brand, has led the overseas expansion of India's hospitality sector. It bought the Ritz-Carlton in Boston in 2007 for $170 million and renamed it Taj Boston. It re-entered the New York market in 2005 after six years with the rights to manage the 201-room Pierre.