Indian Hotels (IHCL) that runs the iconic Taj Mahal Palace and Towers may have to shell out higher lease rentals in a bid to retain the most important property in its portfolio, with its landlord Mumbai Port Trust (MbPT) in no mood to budge from its stand. MbPT, which had sent an eviction notice to IHCL in March 2012 to vacate the property within six months from the date of notice, has demanded a ?fair rent? from IHCL. The two parties are awaiting hearing on the matter in the Bombay High Court.
MbPT is understood to be demanding a ?fair rent? from IHCL, which it said would be on the basis of 6% yearly rent on the market value of the land as per the Ready Reckoner Rate (RRR) 2006, with 4% annual increase thereafter. RR rates are rates fixed by the government, below which sales of property cannot happen in the given area. They are used to calculate the minimum registration and stamp duty charges paid at the time of registering property.
Sources said that if IHCL agrees to pay a higher lease rental for the property, MbPT may consider renewing the lease agreement. ?Several entities in the open market would be willing to pay MbPT the market rate for use and occupation of premises,? said a source close to the development. He added that MbPT has ?no desire to revise IHCL’s status as tenant, until it agrees on higher rent.? A spokesperson from IHCL declined comment on the matter. Meanwhile, an MbPT spokesperson said, ?Since the matter is sub-judice, it is regretted that we are not in a position to share the details sought.?
The lease rental for a month demanded by MbPT is seen at R254.40 per square metre, which aggregates to R1.2 crore annually for the property. The entire property comes to 4057.92 square metres. According to sources, IHCL is paying R322.66 per square metre as lease rent for an adjoining building in the vicinity, while reportedly paying about R1 crore per annum for the use of MbPT’s land housing the hotel currently.
IHCL had entered into three-part lease agreement with MbPT in the 1900s for 99 years. The leases expired in 1999-2001 and since then have not been renewed. Ever since the agreement had expired, Taj is learnt to have made payments and deposits of R7.22 crore to MbPT towards renewal of the leases. However, the renewal of the agreement is still hanging fire as both parties do not agree on terms of the lease rent and the period of the lease.
Taj Mahal Palace and Towers along with Taj Palace and Taj Mansingh in New Delhi make over 40% of revenues of IHCL. All three properties are under uncertainty over their lease agreements.
