The City of Cambridge and Kanavos Enterprises, the developer of the Holiday inn being built in Harvard Square, signed an agreement yesterday setting the height of the hotel at 85 feet, half of the originally planned height.

The agreement sets a precedent for limiting the height of new construction in Harvard Square.

The new hotel will be lower than Holyake Center, about even with the height of the IAB, and only slightly taller than Widener and the Treadway Inn.

Peter Kanavos, president of the development company, and John H. Corcoran, City Manager, signed the agreement yesterday after warmly praising each other's cooperation.

Some observers consider the agreement entered into after four months of negotiations, a concession to neighborhood groups who have fought to prevent Kanavos from constructing an 18-story tower on the site.

The new plan calls for an L-shaped building across from the present Harvard Square Post Office with the shotter side facing Mt. Auburn St. and the longer side along Nutter Rd, Highlighten of the plan changes are:

* building height lowered from 165 feet (18 stories) to 85 feet (8 stories)

* number of rooms increased from 315 to 337.

* number of parking spaces increased from 190 to 225.

* hotel entrance changed from Mt. Auburn St. to Nutter Rd.

* commercial space increased from 32,000 square feet to 55,000 square feet.

Variance

Kanavos must now seek a zoning variance before proceeding with the new construction. He estimated yesterday that the hotel would be fully completed in 18 months if no complications arise.

In the fall the Neighborhood Ten, a local civic group, protested that the hotel design did not fit in with the surrounding area. They particularly objected to the height of the building and the design of the facade facing the neighborhood. The new design alleviates those problems.

Kanavos incurred extra costs because of the delay in constructing the hotel the new completion date is some seven monthly after the original date--and in the redesign Kanavos will now construct the hotel closer to the Charles River on land that is less than solid and build the parking garage below ground.

While Kanavos is satisfied with the increase in the number of rooms and the additional commercial space incorporated into the new plans, he is most pleased about being an integral part of the development of Harvard Square.

The hotel, directly adjacent to the site of the Kennedy Library comples, will be the "first structure completed in what will be a beautiful area." Kanavos said.

1. M. Pei, architect of the Kennedy complex, hopes to have the library completed by July 1976. Early last month he unveiled tentative plans which included a semi-circular building housing the memorial to the late President a library and the John F. Kennedy Institute of Politics. That building is bordered on two sides by the "related facilities" building which includes 150 luxury condominium apartments and commercial space.

Problems still remain over parking. The 225 spaces provided by the Holiday Inn will be taken up by hotel guests, and no replacement parking is currently planned for the spaces which were previously on the building site