University contractors began this week the renovation of the Harvard-owned building which housed Sanctuary, a hostel and counseling service for Cambridge street people, which was extensively damaged in a fire two months ago.

The building at 74 Mt. Auburn St., the former home of the Iroquois Club, was purchased by the University and leased to the Sanctuary for $475 per month for rent and services.

The cost of repairs will be about $40,000, according to Fulton B. Eaglin, assistant to the vice president for Government and Community Affairs. However, Eaglin said that the University's insurance will cover the costs.

When repairs are completed. Harvard plans to let Sanctuary move in again. Charles U. Daly, vice president for Government and Community Affairs, said yesterday. "We are very anxious to get them back in there. A new lease is ready for signature," Daly said.

Sanctuary has temporarily secured space in the Old Cambridge Baptist Church. Much of its counseling and hostel facility programs, however, have been temporarily cut.

Repairs are expected to be completed by mid-May.