Realty check: AP capital moves have hit private and govt investments

G Naga Sridhar Hyderabad | Updated on January 21, 2020

While some of the construction in Amaravati is almost complete, others are stuck at the foundation-and-stilt stage

Plummeting property and land prices in Amaravati put real estate sector in a spot

Even as debates on the pros and cons of shifting the executive capital of Andhra Pradesh to Visakhapatnam from Amaravati keep politicians and government busy, many firms are having nightmares about the return on their investment.

In the last three years, Amaravati had attracted many real-estate and infrastructure firms engaged in residential and commercial ventures. Most of the projects are either half-finished or nearing completion.

Many of these structures come into view when one drives along the stretch of about 20 km from the outskirts of Vijayawada up to Naburu village on National Highway 16.

The future of these investments is now in danger, thanks to AP government’s decision on Monday to have three capitals for the executive, the judiciary and legislature at Visakhapatnam, Kurnool and Amaravati, respectively.

When contacted, Ch. Sudhakar, President, the Confederation of Real Estate Developers Association of India (CREDAI), AP, told BusinessLine that the shift of executive to Visakhapatnam “will definitely hit real-estate developers adversely”.

“Approximately, about 20,000 apartments are coming up in the region. Builders from almost all parts of the country have already invested in the region, expecting a surge in demand, which is now uncertain,’’ Sudhakar said.

“Even if you take ₹30-40 lakh per flat, you can estimate the funds locked up here,’’ he said. This will be to the tune of ₹600-800 crore.

In addition, there are about half a dozen mega commercial projects for housing businesses and technoparks.

Apart from the ongoing projects, there are also huge land banks acquired by businesses and private individuals. “There is over 50 per cent fall in land prices. In many areas, price of a yard has dropped from ₹22,000-25,000 to around ₹10,000,’’ the CREDAI functionary said.

According to industry estimates, the value of already deployed private investment in the Amaravati region is ₹6,000-7,000 crore.

Govt investment

Apart from this, the previous Telugu Desam party government invested in the construction of a High Court, Secretariat and Assembly besides residential quarters for officials in the new Capital. It remains to be seen how the State government will put them to good use now.

The Capital Region Development Authority (CRDA) (which is to be repealed now by the present government) had issued Amaravati Bonds in 2018 to raise ₹2,000 crore. The bonds are listed on the BSE.

Interestingly, work on many half-constructed six-lane roads has come to a halt in the last seven months.

Published on January 21, 2020

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