The Delhi Development Authority will renew the lease for the Taj Palace hotel in Delhi's Chanakyapuri, giving Indian Hotels Company 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. 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.

After the hotel company signed a 30-year lease with DDA in 1983 for this hotel, there were periodic audits by DDA and in a few of them auditors from the two sides did not agree on certain terms. Over the years, the two went for arbitration but the official said that this does not have a bearing on the renewal of the lease and it will still go on even after the lease is renewed. The original lease agreement was for 30 years and gave the right to IHCL to renew it for another 25 years on the same terms as per a report in ET by Ravi Teja Sharma.

IHCL is faced with a tough challenge with two of its marquee properties in Mumbai and Delhi, the original leases for which have expired recently. The 99-year lease for Taj Mahal Palace in Mumbai, which stands on land owned by the Mumbai Port Trust (MPT), ended in 2001-02 while that of the Taj Mahal or Taj Mansingh hotel in Delhi with the New Delhi Municipal Council (NDMC) ended in October 2011. While the two hotels are still being operated by IHCL under the Taj brand name, the two government bodies haven't yet extended the leases for the hotels.

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