The Mahal Daulat Khana was established by Nawab Sir Sadiq Muhammad Khan Abbassi (IV). The construction of the building was started in 1881 and was completed in 1886. The total expenditures of constructing this Palace were two lac rupees. A big box was placed in front of the Kingly door of the Daulat Khana Palace and the key of the box was kept by His Highness.
Because this box was especially for those people who wanted to put their applications in it. This box was opened daily in the morning by His Highness himself and the applications were considered. His Highness acted according to the problems of the people written in the applications.
A huge wall was put up all around the Palace and a beautiful garden was inside all around the wall. During the construction of the Daulat Khana Palace the buildings of Baghi Khana, Tosha Khana and Rath Khana were also prepared.
A pool which was 400 feet in length and 150 feet in width was also prepared and in front of this a beautiful Mosque was prepared only using wood stuff. Due to bad condition of the mosque after a century it was renewed by Sahibzada Qamar-Uz-Zaman Abbassi in 1981.
The mother of Nawab Sir Sadiq Muhammad Khan Abbassi (V) was resident in this palace till 1913.This palace is the birth palace of Nawab Sir Sadiq Muhammad Khan Abbassi (V). He was born on 30th of September 1904.