Every indian business dreads waking up to a bill from the state. So too the Taj Mahal Palace. The Mumbai Port Trust, owner of the land upon which the landmark hotel sits, is demanding $92m in retrospective rent for the years 2012-22. The Taj, which is owned by Tata Group, a conglomerate, has called the demand “exorbitant and untenable” in a petition to the Bombay High Court. The claim’s size and the Taj’s prominence make the claim unique. But many tenants get similar treatment. As a result, Mumbai’s old business district, once home to many global firms, has slid into disrepair.
Mumbai grew out of a natural deepwater harbour. The Port Trust was established in 1873 to administer both shipping and ancillary businesses such as piers, warehouses, refineries—and hotels. Rather than sell land outright, the trust leased plots on 940 hectares (2,300 acres) for periods of up to 99 years. All those original leases have expired, the Taj’s at the turn of the millennium.
What followed is a muddle. Some of the leases, including the Taj’s, have been rolled over. Some tenants pay what they owe, some pay sometimes, some don’t. From the early 1990s some began challenging the trust’s rent revisions in the courts. Eviction notices are sent but stayed, pending court hearings. Of the 3,000 or so tenants on trust land, more than 1,200 are now litigating. The agency has had to hire more than 200 outside lawyers to deal with the caseload. There is some debate over whether even one of these cases has actually been resolved.
The Port Trust says the rent rises are determined by a formula tied to market rates. But transactions are rare, so finding the market rate is hard. By one reckoning not one new lease has been signed in 20 years. A consequence of the stalemate has been that, with the exception of the Taj and a few others, many beautiful buildings have not been maintained. The uncertain legal status gives tenants little reason to invest in the property. Nor can they transfer it to new tenants. The Taj kerfuffle may at least accelerate welcome changes. The Port Trust has quietly been drafting new, more flexible rules to ease the process of renewals. Better a century late than never.■
To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter.
This article appeared in the Business section of the print edition under the headline “A Taj of class”