Explainer: Why will Delhi’s famous five star hotels now have to pay crores of rupees to the government?

The central government has increased the annual rent of the land leased to many famous five star hotels in New Delhi. Many hotels will now have to pay crores of rupees instead of lakhs. At least two hotels – The Imperial Hotel and The Claridges Delhi – have approached the Delhi High Court against this decision of the central government.

Let us tell you when and how the land was given on rent to the Five Star Hotels of Delhi, how much annual rent was charged till now and why has the hotel management challenged the government’s move?

When and who gave land to the hotels?
In 1911, when King George V of Britain announced the transfer of the capital of the British rule from Calcutta (now Kolkata) to New Delhi, the government started acquiring land for the construction of new buildings. Buildings like the Council House (which became the Parliament after independence) were to be built on these buildings. The acquisition also included identifying land for the construction of hotels in the new capital. This land was given to the hotel operators on a permanent lease or perpetual lease. An annual rent was fixed for the land, which was to be revised every 30 years.

What were the terms of the lease?
the indian express According to a report, most of the people to whom the government gave land for the hotel were businessmen and contractors who had worked on other government construction projects. The lease terms also stated that the lessees could lease it to their successors in perpetuity, but the land would be used only for the hotel and the cost of construction would have to be borne by the lessees.

For example, The Imperial Hotel was granted a perpetual lease of 7.938 acres of land on Janpath Lane to SBS Ranjit Singh on April 8, 1932. The lease was dated July 9, 1937. The lease mentions Ranjit Singh as a “contractor” and the son of RBS Narayan Singh, a contractor of NA Curzon Road. The lease fixed the land rent at Rs 1,786 per annum and the rent was first revised in 1962.

Similarly, 2.94 acres of land on Dr. APJ Abdul Kalam Road (earlier known as Aurangzeb Road) was leased to Lala Jugal Kishore on November 12, 1936 for The Claridges Hotel. The rent for the land was fixed at Rs 470 and was to be revised after January 1, 1961. In 1972, the land was purchased by Claridges Hotel Private Limited and the lease was transferred in its name in 1976.

How was the land rent decided?
According to the terms of the lease, the rent of the land was to be calculated on the basis of the value of the land. This did not include the value of the building constructed on the land. It was also decided that the annual rent, at the time of signing the lease and even at the time of subsequent amendment, would not exceed one-third of the total value of the land. The rent was to be assessed by the Collector or Deputy Commissioner of Delhi.

How did the rent reach crores?
Of the two hotels that have gone to the Delhi High Court against the decision of the Central Government, the land rent for The Imperial was revised to Rs 10,716 in 1972 and was valid till 2002. According to the terms of the lease, the rent was to be revised again in 2002, but the old rent was fixed for the next 30 years (from 2002 to 2032). However, the Center increased it to Rs 8.13 crore in March. Similarly, in the case of The Claridges, the land rent was increased from Rs 2.13 lakh to Rs 8.53 lakh per year in 2016. According to the hotel management, this rent was to remain till the year 2046. However, the government has also increased the rent of Claridges to Rs 3.85 crore annually.

Now what is the dispute about?
The biggest reason for the controversy over the decision of the central government is that both the hotels will have to pay the increased rent from the date on which the rent revision was due. For example, the Imperial Hotel will have to pay rent from 2022 instead of 2024. Similarly, The Claridges will also have to pay rent from 2006 till now. According to the Indian Express, The Imperial Hotel has been asked to pay Rs 177.29 crore as outstanding rent from 2002 to 2024, while The Claridges has been asked to pay Rs 69.37 crore. The hotel owners argue that the rent revision is a violation of the original terms of the lease. Since no revision was pending, such a notice does not even make sense.

Tags: Delhi news, Five Star Hotel