Bengaluru: Karnataka state Congress government is facing intense scrutiny and accusations of financial mismanagement following a controversial decision to renew a land lease agreement for a prime property in the heart of Bengaluru. Critics allege that the move, which involves a multi-acre plot, could result in a staggering revenue loss of up to Rs 600 crore over three decades, according to confidential documents and insiders with direct knowledge of the matter.
The contentious deal involves a significant parcel of land measuring over one lakh square feet in Domlur, adjacent to the prestigious Karnataka Golf Association. The property, which hosts the Hotel Royal Orchid, was initially leased to a private company in 1992. The original 30-year lease expired in early 2022, prompting the firm, Royal Orchid Hotels Ltd, to seek an extension.
However, internal records and communications reveal that officials within the Karnataka State Tourism Development Corporation (KSTDC) raised serious concerns and advised against renewing the lease. Their investigation uncovered that the lessee had committed a major breach of the initial agreement by sub-leasing a portion of the land to another private entity without seeking prior permission from the government.
The original lease terms explicitly prohibited the transfer or sub-leasing of the land without express consent. Despite this clear violation, and a strong recommendation from the then-managing director of KSTDC to reject the renewal request and instead put the property up for public auction, the government proceeded with the extension. The KSTDC official’s letter to the government underscored the illegality of the sub-lease and argued that a tender process would be the most beneficial approach for the state.
The decision to renew the lease is particularly alarming as it appears to circumvent the provisions of the Karnataka Transparency in Public Procurement (KTPP) Act, which mandates that public assets be leased through a competitive bidding process. Experts and officials argue that a public auction would have ensured a fair market value for the property, significantly boosting government revenue.
Instead of an auction, internal documents from March 2023 show that a meeting led by a senior official in the tourism department decided to renew the lease for a portion of the land while canceling the agreement for the illegally sub-leased part. This choice has drawn sharp criticism for not only bypassing standard legal procedures but also for the exceptionally low price at which the lease was renewed.
Sources familiar with the details of the new agreement state that the lease was finalized at a rate of less than Rs 1 crore per acre. This valuation is a far cry from the potential earnings the state could have generated. One source estimated that a public auction, including the hotel’s assets, could have generated an annual income of Rs 20-25 crore for the government, compared to the less than Rs 2 crore per year the new lease is expected to bring in. Over 30 years, this translates to an estimated loss of at least Rs 600 crore.
Further compounding the issue, the government’s decision to base the new lease rate on the agreement with the Karnataka Golf Association has been widely criticized. The KGA is a non-profit sports body, whereas Royal Orchid is a for-profit commercial enterprise. Critics argue that this comparison is flawed and fails to account for the commercial nature of the business, which should command a significantly higher lease amount.
The government’s inconsistent approach is highlighted by other lease agreements involving the same company. For properties in Mysuru, including the Royal Orchid Metropole and Brindavan Garden Palace, the company pays a percentage of its gross income, in addition to a fixed rent, a model that generates substantially more revenue for the state.
An official speaking on the condition of anonymity expressed dismay at the decision. “Considering the importance of optimizing resources to finance public welfare schemes, this renewal is a significant financial setback. The lease should be immediately rescinded, and bids should be invited to properly monetize the land,” the official stated.
