The Hindu Business Line : Up against the price wall

Rajiv Swagruha, a housing scheme by the Andhra Pradesh Government for the middle class in major towns, has hit a roadblock in Visakhapatnam city and also at Anakapalle, the jaggery town in Visakhapatnam district.

Though thousands applied for the housing unit initially, only a few hundred buyers responded when allotment letters were sent to the applicants. The reason was that they felt that the price fixed by the State Government for these houses was too high.

Early enthusiasm

There was much enthusiasm initially when the State Government announced the scheme two years ago. At that time, the property prices were high even on the outskirts and, when the Government announced a housing scheme at Endada, the middle class sections in the city were happy.

There were more than 11,000 applications for the Endada scheme and the Rajiv Swagruha Corporation Ltd (RSCL) officials did not imagine at the time there would be any difficulty in selling the units.

But there was much delay in implementation, and property prices came down substantially on the outskirts of Visakhapatnam.

When the officials sent allotment letters to the applicants, fixing the price of a single-bedroom apartment (523 sq.ft) at Rs 11.50 lakh and a double-bedroom apartment at Rs 16.60 lakh, the applicants did not feel it worthwhile to buy the units at the rates fixed by the Government. Only a few were willing to buy the units and they sent the consent letters. Of the 11,280 applicants, hardly 400 sent consent letters. Many wrote to the officials seeking refund of the initial deposit.

Token reduction

Many applicants wanted the Government to reduce the cost of the apartments substantially in view of the changed circumstances and the market conditions, but the plea went unheeded. However, earlier this month, the officials decided at a meeting that a token concession of 0.5 per cent to 2 per cent of the apartment cost would be given to those who paid the total amount within three months of allotment. This has not evoked much enthusiasm.

There has been very little progress at Endada. Though the initial deposits were collected two years ago, the levelling work has started only now and it is estimated that it will take at least two more years for the completion of the project. It may, in fact, take much more time at this rate.

A repeat

A similar story has been repeated at Anakapalle. The rate for a two-bedroom apartment (760 sq.ft) at Anakapalle has been fixed at Rs 13.15 lakh unrealistic for the small town where many of the applicants would rather go in for an independent house. More than 3,000 people applied initially for the Anakapalle houses and hardly 20 have sent their consent letters, once allotment letters were despatched.

Market forces cannot be ignored. It remains to be seen whether the lesson has been learnt by the State Government.

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