Capital changes and changing prices in Andhra Pradesh Premium

With the change in government, real estate may once again shift to Amaravati

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.