Karnataka govt's land lease to private hotel firm raises questions over ₹600-crore revenue loss

Bengaluru: The Karnataka government has come under scrutiny for renewing a land lease in Bengaluru in violation of legal provisions. According to documents accessed under the Right to Information Act and sources familiar with the matter, this could potentially deprive the state exchequer of an estimated ₹600 crore over the next three decades. According to a report published by Deccan Herald, the controversy centres on a 2-acre and 19-gunta parcel of land (1,07,593 sq ft) adjacent to the Karnataka Golf Association in Domlur, where Hotel Royal Orchid currently operates. The land was originally leased to Royal Orchid Hotels Ltd in 1992 through the Karnataka State Tourism Development Corporation (KSTDC). The lease was agreed upon for a 30-year term at ₹1.11 lakh per acre annually. The lease expired on January 1, 2022, after which the company sought renewal. KSTDC records show that the firm had breached the original lease terms by sub-letting 25 guntas (27,000 sq ft) to another private entity, Golf View Homes, for ₹23.5 lakh without prior government approval. The KSTDC managing director, citing the violation, had recommended that the renewal request be rejected and the property instead be put up for auction. The 1992 government order prohibited transfer of the leased land by way of sublease, mortgage, or any other arrangement without official consent. Ignoring this, a March 2023 meeting chaired by the then additional chief secretary of the tourism department decided in favour of renewing the lease for Royal Orchid Hotels. The decision also included cancellation of the portion of land that had been sub-let, but no punitive action was taken for the breach. Officials pointed out that the lease renewal bypassed the Karnataka Transparency in Public Procurement (KTPP) Act, which requires public properties to be leased only through open auction. "If auctioned, the land along with existing hotel infrastructure could have fetched the government ₹20-25 crore annually. Instead, the revised lease terms are set to yield less than ₹2 crore per year, amounting to a loss of at least ₹600 crore over 30 years," a senior source said. The renewed lease was fixed "on the lines of" the Karnataka Golf Association agreement, although officials noted the comparison was flawed. While the KGA is a not-for-profit body promoting sports, Royal Orchid Hotels is a purely commercial enterprise. In earlier communications, the KSTDC had estimated the market value of the Domlur land at ₹16,000 per sq ft. "Given the importance of mobilising resources for welfare schemes, the decision to renew the lease is a setback. The land should have been auctioned in the interest of public revenue," an official remarked. For comparison, Royal Orchid pays significantly higher lease rentals for properties in Mysuru, including ₹3.23 crore for the Metropole and ₹1.72 crore for Brindavan Garden Palace. Both these are linked to a revenue-sharing arrangement of 24 per cent of gross income.