The final modalities are currently being worked out and a memorandum of understanding is likely to signed early next week.

Hotel Leelaventure would not be investing in the joint venture (JV) except for the land. Funds for development - estimated at around Rs 60 crore - would be brought in by the Rahejas for which it has tied up with HDFC for a line of credit, Hotel Leelaventure senior vice-president (corporate finance) R Venkatachalam said.

The construction will commence two months from now and would be completed in 24 months, he said.Mr Venkatachalam told The Financial Express that the Hotel Leela-Raheja JV would share the revenue in the ratio 56:44. This ratio could be either by way of sharing the developed commercial space or lease rentals or by way of an outright sale, depending on the best possible proposition available, he said.

The current lease rentals in Mumbai is around Rs 100 per square feet per month while realisation on sale as per market rate of Rs 5,000/Rs 6,000 square feet would help Hotel Leela net around Rs 130 crore, Mr. Venkatachalam added.

Hotel Leela had completed the development of a commercial complex in Mumbai and Bangalore each, with space of 1,10,000 square feet and 2,50,000 square feet. A large percentage of these properties have been leased out to banking, infotech and large MNC conglomerates.

The lease rentals in Mumbai for commercial space hover around Rs 100 per month per square feet while in Bangalore it is around Rs 75 per month per square feet, he said.

Lease rentals would contribute around Rs 25 crore to the total turnover in 2001-2002, and will be a major boost to the bottomline as the operating expenditure would be less than 20 per cent. Along with food & beverages and room rates, lease rentals would be a major component of the company's turnover, he added.

The company plans to securitise the lease rentals enabling it to reduce its average interest cost to 12 per cent from 14 per cent on annualised basis. During the last three months, the company had securitised Rs 260 crore for revenue generated through the credit card users of the hotel bringing its average interest cost from 20 per cent to 14 per cent on an annualised basis, he said.

The promoters of the company had during the year hiked its stake from 44 per cent to 68 per cent on account of preferential allotment and warrant conversion, thereby taking the paid up capital of the company to Rs 60 crore from Rs 32 crore.