Andhra Pradesh Chief Minister N. Chandrababu Naidu addresses the first meeting of his Cabinet in Amaravati on June 24, 2024.
| Photo Credit: ANI
The National Democratic Alliance (NDA)’s landslide victory in Andhra Pradesh is expected to give clarity to the real estate sector. The realtors, who were awaiting the results on June 4, are now planning investments and businesses more in Visakhapatnam and Amaravati than in other parts of the State. A correction in investments in Visakhapatnam is likely, while the real estate sector in Amaravati is expected to witness a sudden surge.
The realtors in Amaravati and Visakhapatnam invested hundreds of crores of rupees between 2014 and 2023. During those 10 years, real estate growth was not natural either in Amaravati or Visakhapatnam. It was a bubble created by the players, and supported by successive governments.
Soon after the bifurcation of combined Andhra Pradesh in 2014, the realtors and investors looked for greener pastures in residual Andhra Pradesh. They made huge investments in the expectation that there would be phenomenal demand for housing as the capital was to move to Amaravati from Hyderabad.
However, there was an inordinate delay in constructing the capital of Amaravati. The foundation was laid in October 2015, but the real estate market failed to gain traction, and real estate players and investors returned to Hyderabad. During the same period, the government changed in Andhra Pradesh. The YSR Congress Party (YSRCP), led by Y.S. Jagan Mohan Reddy, accused the previous Telugu Desam Party (TDP) government of insider trading concerning Amaravati, and floated a three-capital formula for the development of the State.
Investments began flowing towards Visakhapatnam, which was touted as the executive capital. Many ventures on the outskirts of Visakhapatnam city, such as Madhurawada, Pendurthi, Naidu Thota, Sujatha Nagar, Vepagunta, Narava, and BHPV, have come up, even though they remain incomplete for various reasons including financial difficulties faced by the builders. Today, a double bedroom flat in these areas costs more than ₹50 lakh, compared to just over ₹33 lakh five years ago. More than 1.5 crore sft of built-up space, both residential and commercial, is available in Visakhapatnam, but there are hardly any takers.
Amaravati and Vijayawada face the same problem. A huge inventory is piled up in Tadepalli and other areas that are close to Amaravati. There are at least 5,000 unsold flats. The same situation prevails in areas such as Poranki, and other suburbs of Vijayawada. About 2,500 flats are available in the outskirts of Vijayawada.
A double bedroom flat in areas surrounding Visakhapatnam now costs more than ₹50 lakh compared to just over ₹33 lakh five years ago. While a two-bedroom house (2BHK) costs around ₹35 lakh-₹45 lakh on the outskirts of Vijayawada, a 3BHK costs ₹50 lakh-₹80 lakh. Though there is not much inventory in Vijayawada city, a 3 BHK costs ₹1.5 crore-₹2.5 crore in the city. Most people in Visakhapatnam are salaried middle-class income groups. They do not buy properties for investment purposes; they buy it for residential purposes. In comparison, investments were made in Amaravati predominantly for investment purposes.
Now, in both Amaravati and Visakhapatnam, realtors are optimistic about the sector’s growth in the coming months. Though deals have not been closed, they have been getting enquiries.
The policies of the TDP or the YSRCP governments did not fuel the real boom; instead, a bubble was created. The realtors recalling South Korea’s experience in the late 1990s say that the governments should take corrective measures in Andhra Pradesh.
Though the registration fee is one of the main revenue sources, the government should focus on the gradual development of the real estate sector for sustained development. The industry and services sectors must be developed so that there are more buyers for both residential and commercial spaces. Industry-led development and the creation of new jobs will bring in new buyers.
Real estate growth depends on other factors also. It is important to develop basic infrastructure facilities such as roads apart from strengthening flight and railway connectivity. Hyderabad gained from the uncertainty over the capital issue in Andhra Pradesh. But other factors also played a role, such as the robust growth of the industrial and services sectors, as well as infrastructure. The new government should start constructing the capital and focus on the same areas in which Hyderabad is doing well.