Builders broke ground this week for a Holiday Inn on Mount Auburn St. though negotiations to fund completion of the project are still pending, Harold J. Kanavos, developer of the proposed motel, said yesterday.

"Up to six months ago it was practically impossible for anyone to get money for new projects," Kanavos said. Kanavos is presently financing preliminary construction of the $8 million project "out of his own pocket," he said.

Funding Negotiations

The developers are negotiating for funds with a New York bank which Kanavos declined to identify. He said, however he is "confident" that present negotiations would not fall through.

Workers at the Holiday Inn site have already poured some concrete, and preliminary engineering work and site preparation has begun.

His firm, Kanavos Enterprises, has additional potential sourses of funds, he said.

Plans Changed

Last year, members of the Harvard Square Development Task Force and the Neighborhood Ten Association protested the original plan for an 18-story Holiday Inn with large signs.

The compromise reached in December between the community groups and the developers calls for a nine-story building with signs in small script.

Kanavos said the building plan agreed on last December was "the first time a joint agreement has been reached between environmentalists and developers."

He estimated the new building, though smaller in size, will cost $4 million more than the original plan, which was estimated at $4 million.

Skyrocketing Costs

Skyrocketing material and labor costs were primary factors in increased costs, Kanavos said, in addition to interest payments on the unused land.

Kanavos said there is "definitely a relationship between the Holiday Inn and the Kennedy Library," although plans for the motel began four years before plans for the library.

He said he hopes the library will be built because it "would increase and enhance the Holiday Inn property."

Construction of the Kennedy Library is awaiting completion of a federal environmental impact study now underway.

Estimates of the number of tourists that the library will bring to Cambridge range from 700,000 to 1.8 million per year, with a peak attendance of up to 8000 tourists a day.