A $US250 million ($A324.30 million) plan by Australian businessman James Packer and actor Robert De Niro to turn Barbuda's K-Club hotel into a luxury resort has created controversy on the island.

De Niro and Packer want to renovate the K-Club, which was once visited by the late Princess Diana, Antigua and Barbuda’s consulate in New York has said on Twitter.

The proposal was approved last week in a referendum by a vote of 206-175.

But the fact that fewer than half of Barbuda’s roughly 1,400 residents cast ballots has caused controversy, The Daily Observer reports.

The K-Club in its glory days

Packer and De Niro’s proposal was presented to the Antigua and Barbuda government in November 2014.

At that time, Prime Minister Gaston Browne reminded the public of De Niro’s frequent visits to the islands and he designated the actor as Special Economic Envoy in the hope of attracting major investment to the Caribbean country.

The opposition Barbuda People’s Movement asked residents to vote “no” to the proposal, claiming that if it was approved, 102 hectares of land would be conceded to the investors for a time frame of almost 200 years.

It also claimed that under the Barbuda Land Act, all land on the island belongs to the people, though the legislation does authorise cession of land for development with approval from the Cabinet, Council and people.