The Hindu Business Line : Visakhapatnam witnessing a slump

There has been a marked slump in property prices for the past six months to one year in Visakhapatnam and locations between Visakhapatnam and Kakinada, said to hold high potential for industrial development .

Within the city limits, property prices are stagnating and construction activity appears sluggish.

Apart from the general global economic slowdown, analysts attribute the slump to some specific local factors. Since 2004, property prices have galloped in and around the city. A key factor that drove prices up was the demand for a separate state of Telangana and the perceived importance of the Vizag-Kakinada region in the event of bifurcation, or trifurcation, of the State.

This political factor, coupled with the hype generated by the statements of the State Government about developing the Vizag-Kakinada as a major industrial belt, gave a huge boost to the property prices. On the outskirts of the city property prices went up four-fold and five-fold. From Rs 3,000-4,000 per square yard, at places such as Kapulauppada, prices went up to Rs 15,000-20,000. During the boom, there was a good response to the bulk auctions conducted by the Visakhapatnam Urban Development Authority (VUDA), which could get Rs 5-6 crore per acre in auctions. Many companies from Mumbai, Hyderabad and Bangalore lapped up the lands but now, it is said, the companies are reluctant to pay the rest of the amount and take possession of the lands.

Unable to attract companies for bulk auctions, the VUDA recently resorted to auction of smaller individual plots at Madhurawada and other places, but even for such auctions the public response has not been very encouraging, an indicator that the sector is witnessing a downturn.

Elections and after

The State Government also took a crucial decision earlier this month, scrapping the GO on the proposed industrial coastal corridor between Kakinada and Visakhapatnam. This move is likely to depress property prices further.

However, the proposed Petroleum, Petrochemical Products Industrial Region (PCPIR) between Kakinada and Visakhapatnam has not been done away with yet, even though the Opposition is demanding that too. There are also two major notified special economic zones between Kakinada and Visakhapatnam, along the coast, one near Kakinada port (the Kakinada special economic zone) and the other at Atchuyuthapuram in Visakhapatnam district.

Besides, on the picturesque beach road between Visakhapatnam and Bheemli, two IT special economic zones are coming up at Rushikonda, overlooking the Bay of Bengal. Only two companies — Kenexa and Symbiosis — have started operations. Construction is in progress at other sites and the impact of the slump has been felt by the SEZs.

The trend is expected to continue for sometime more, at least till the next Assembly elections and general elections scheduled to be held early next year. The sector may witness some buoyancy, depending on the election outcome and the general economic situation.

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