Removal of the asbestos-riddled clubhouse is hoped to attract more interest to redevelop the two hectare site in Giles Street.

The club was closed in 2015 blaming poor governance and a decline in patronage.

In 2016, Katherine MLA Sandra Nelson secured $250,000 from the NT government to develop the club as "an all-purpose community centre in Katherine".

But on closer inspection the clubhouse was found to be "beyond repair" and would have cost "more to fix it than we had" and zoning problems also emerged.

It has been for sale by the NT Government ever since.

That $250,000 was instead transferred to Katherine Town Council to include a community space within the new Don Dale sporting complex at the sportsgrounds.

That project has also been struck with problems and is yet to begin.

The NT Government today revealed a second "structural inspection report" was commissioned in March which again found "the asbestos structures would require extensive works to make them compliant with the National Construction Code and found they were beyond economic repair".

In February the government said it had found a "potential buyer" for the site after an approach was made by the council to temporarily use the grounds while the sportsgrounds upgrades were under way.

The Department of Infrastructure, Planning and Logistics also said Giles Street did not have the necessary certification for either the oval or the change rooms/toilets to allow them to be used.

DIPL's northern region senior director Claire Brown said the department was "currently dealing with an application for a direct sale" of the site.

"Given these dealings the department cannot guarantee the grounds will be available to use during the 2020 sports season," Ms Brown told council earlier in the year.

The Katherine Times has questioned the government on this "potential buyer".

"The future use and redevelopment of the site is still being determined," a spokeswoman said.

"Discussions with a prospective buyer remain ongoing."

Town leaders had earlier hoped a developer would buy the site and build a major hotel as a tourist drawcard.

Some residents feared the open space would be lost to Katherine.

A government spokeswoman today said the demolition would "signify the opportunity for private investment, which will create jobs for Katherine locals".

Infrastructure, Planning and Logistics Minister Eva Lawler said: "The Government has made unprecedented investment in Katherine in the past four years, because we know it is a place people are increasingly choosing to live, work and raise their families.

"In addition to improving health and safety for locals with a new $8.5 million fire station, a $4 million CT scanner at the Katherine Hospital and Police Auxiliary Liquor Inspectors, we have also provided the council with an $11.4 million grant to upgrade the CBD, sportsground and showgrounds, which has supported the jobs of Katherine locals."

Labor candidate for Katherine, Kate Ganley said: "Clearing the Katherine Sports and Recreation Club site will open up the possibilities of developing something new, benefiting the Katherine economy both now and into the future and supporting local businesses during the demolition phase.

"This site represents an excellent development opportunity to make our town even more attractive to visitors. Katherine can expect a bumper tourism season next year, as we develop our attractions for locals and interstate visitors."

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