The Tatas and Dhanraj Gir, the current owner of the building, are expected to ink the agreement soon. The deal for the building is slated to take place in phases, with the Taj group investing around Rs 27 crore in the first phase. An Indian Hotels spokesperson confirmed that the company was looking out for space for its backroom operations.

"We are talking to a number of parties in Mumbai, but we are yet to sign a deal." The new premises will be utilised to centralise the Taj group's back-office work. The Taj Mahal Hotel in Mumbai, where the group's corporate office is located, is facing an acute space crunch and shifting a part of the back-office is, therefore, a priority on the agenda. `Dhanraj Mahal'is one of the oldest buildings in Mumbai, built in 1940 by the Dhanrajgiri Maharajas. It was acquired by the ministry of defence during World War II and was later returned to the Maharajas.

The building has a total area of 1,30,000 sq ft and has a scenic location overlooking the Arabian Sea. It has a huge central courtyard. `Dhanraj Mahal' is now tenanted to residential and commercial users. As when the tenancies expire, the Taj group will go on purchasing the space. The space crunch at Indian Hotels has grown acute after the company inititated a number of major corporate and administrative restructuring exercises to strengthen its back-office operations.

The company's operations have now been regrouped under five strategic business units (SBUs), namely, the luxury hotels division, leisure hotels, business hotels, air catering services and international operations.

The five SBUs are, in turn, supported by strong central groups such as sales and marketing, finance, projects, operational standards, andlegal affairs, all of which require extended space. A series of internal measures have also been initiated to significantly upgrade the physical aspects and upgrade service standards. Indian Hotels is also making investments in acquiring a number of new hotels. In recent months, it has acquired the Blue Diamond Hotel in Pune from the Kirloskars, and the City Inn in Baramati.

The new hotels of the group that have started operations this year include the Taj Palace resort in Jodhpur and the Taj Exotica at Goa, a luxury hotel positioned at the upper end of the market. The group plans to forge ahead with its expansion plans which include extending operations to north-east India.