The erstwhile Hotel Royal Palace, which emerged as a landmark during the 1990s — a time when the city’s landscape began to change gradually — but also slipped into oblivion during the years to come, is being demolished.

Now known as Hotel Chidambara on Central Bazar Road in Ramdaspeth, it was also among the prime properties to be auctioned by a bank those days when loan defaults had become a major issue. The hotel was taken over by Shikshak Sahakari Bank, which auctioned it under the Maharashtra State Cooperatives Act to recover its dues.

The current structure is being broken down to pave way for another hotel, a 3-star one.

The property spread in an area of over 9,600 square feet has been purchased by Orient Group, which runs a chain of nine budget hotels in the city.

The property was purchased for INR 12 crore from one Agrawal family, whose members held it after the death of the patriarch Balakrishna Agrawal who had originally bought the hotel from Shikshak Sahakari Bank.

Afzal Mitha of the Orient Group, who confirmed the development, said there are plans to build a new hotel in three years. “The property was purchased last year and now as the situation is improving on the Covid front, we have started with the demolition work,” he said.

The Orient Group plans to build an eight-storeyed structure with 60 rooms in the new hotel, apart from facility like banquet hall, he said.

The Hotel Royal Palace originally belonged to Raj Kumar Khattar, a businessman from the city. As it went into losses, Shikshak Sahakari Bank took over the property. Khattar’s bungalow behind Alankar theatre was also taken over by the bank.

The auction by the bank had gained much attention in 2003. After over three rounds, it finally fetched over INR 4.52 crore, said a source in the bank.

Agrawal had then changed the name from Hotel Royal Palace to Hotel Chidambara. The hotel ran for some years and ultimately closed down around decade ago. Even under the new management, the hotel came under hammer. This time, the action was under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFESI Act) by a PSU bank.

Mitha said this would be the first ever premium hotel of the Orient Group. “So far, we have been only into budget hotels where the business depends on volumes,” he added.

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