The Puspavanta Palace at Kunjavan, constructed in 1917 by Maharaja Birendra Kishore Manikya, is currently being used as the state's Raj Bhavan.
Mackintosh Burn, a West Bengal government enterprise, has been assigned to build the two-storied building with an estimated cost of Rs 30 crore. The building is scheduled to be completed within two and half years.
Governor Patil said the Puspavanta Palace, a heritage building, was built in accordance with the then architectural methods and was not earthquake resistant.
This palace had been made Raj Bhavan because of its association with royalty and the fact that Rabindranath Tagore and other great personalities of that time had stayed in it on different occasions as royal guests, he said.
Chief Minister Manik Sarkar said, the 13th Finance Commission has sanctioned Rs 30 crore for building the new Raj Bhavan.
Former Governor K M Seth was also present on the occasion.