Mark Lancaster, minister for defence personnel and veterans, insisted this money would be better spent on the front line, ensuring Britain's safety.
He revealed the figure during a debate in Westminster Hall on Wednesday (February 24) about controversial proposals to sell the Grade II-listed military quarters.
Twickenham MP Tania Mathias, who secured the debate, made an impassioned appeal to keep the building as the home of the Royal Military School of Music, which has been based there for more than 150 years.
'The MoD has managed to create such hostility in a peace-loving community'
"This isn't about a building; it's about a community. It's no ordinary building and it's no ordinary site. Kneller Hall effectively is Whitton and Whitton is Kneller Hall," said the Conservative member.
"It's tragic and extraordinary that in peace time the MoD has managed to create such hostility in a peace-loving community. The MoD may have estate agents but what it needs are historians and psychologists...
"In London we need housing but we need those homes to be part of a community... You can't rip out the heart and soul of a community and all its identity and replace it with housing that has no identity."
Ms Mathias also highlighted the case of Dave Barnes, a soldier based at Kneller Hall, who has made it past the blind auditions in BBC talent show The Voice.
'I don't want Whitton to have its own Brassed Off drama'
"I don't want him to be playing the last post in that competition, and I don't want Whitton to have its own Brassed Off drama," she said.
The MoD announced in January that Kneller Hall, in Kneller Road, Whitton, was one of 12 military sites across the country due to be sold to cut costs and free up space for housing.
Nearly 5,000 people have signed an online petition set up by local resident Nikki Bradshaw opposing the sale.
Mr Lancaster said on Wednesday that he understood the feelings of the local community but insisted Kneller Hall was no longer fit for purpose.
"This is a stately home, not a school. To bring it up to standard for its current use would cost more than £30m," he said.
'Every pound we spend here is a pound that can't be spent on the front line'
"Is spending that amount of money on a site which house fewer than 75 staff really in the best interests of defence and military capability? Is it the best use of public money?
"Every pound we spend here is a pound that can't be spent on the front line."
Mr Lancaster said there were barracks at Chatham and Minley which had the space and facilities to accommodate the Royal Military School of Music.
He said the MoD had already begun talks with Richmond Council's planning department about the future use of Kneller Hall and its grounds.
He revealed 192 homes were proposed for the site but gave his assurance the Metropolitan Open Land surrounding the building would be retained, along with a number of trees which are subject to preservation orders. He also said the site would not be disposed of before 2018.
In response to calls from Ms Mathias for him to attend a public meeting at Kneller Hall about its proposed sale, he said he was happy for members of his department to address such a meeting.