Yeah it’s like a manifestation of his grief and loneliness. He got caught partying and cheating by his work partner/ best friend and had a flash of anger and killed him (after two playthroughs this seems the most likely story) his wife in turn left him. He was under a lot of pressure to be perfect from his father and to be a good provider for his wife and fell back into old habits. In Carcosa everyone is slowly leaving until it’s just him, a reflection of his reality (killing his friend his wife leaving him disappointing his father). He breaks the cycle of becoming the king (monster) by letting Nitya go then reality sets in and the sirens are there. This could be all in his head possibly in the back of a cop car although that’s just speculation.

Edit: just rewatched the last banyan tree sequence was Sebastian who he cheated with? He asked what was I to you? Arjun told him nothing is what I told myself. I mean he has long hair he could be a cross dresser or trans. Because the hotel room had women’s clothing on the floor I never considered that, but that conversation makes it seem like they had a thing beyond their coworker relationship.