ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Real Estate of Bifurcation

Notes from Vijaywada

The bifurcation of Andhra Pradesh has an unintended beneficiary, the author finds, in real estate brokers and speculative investors. The promise of capital formation in Vijayawada and connivance of politician-builder lobby have only added wings to the massive speculation of land and property prices in Seemandhra. 

Travelling by car from Hyderabad to Vijayawada was indeed a new experience. Despite travelling by the same road over the past four years, this recent trip in the 3rd week of June was a different experience altogether. The road trip seemed to indicate the reversing of capital flows in the erstwhile Andhra Pradesh (AP). In the past, capital flowed from the Andhra region to Hyderabad. Now the reverse is happening – if the road trip is indicative of a trend. 

Hyderabad Vijayawada Highway

The observation of traffic on the Hyderabad-Vijayawada National Highway (NH 65) seemed like a good starting point to study the changing economic pattern in the region. The four-laning of NH 65 was formally completed in 2012. The traffic is generally high only during the festival holidays - during Pongal/Sankaranthi period. However, it was noticed that after the election results have been declared, vehicular movement on the highway has consistently increased. The journey time has increased by more than an hour; in the past it took about four hours or less to cover 272 kilometres. This time it needed a little more than five hours. Usually a large part of the traffic consists of trucks. In contrast, now, the traffic is comprised of higher-end cars. An overwhelming number of cars are from Hyderabad-Vijayawada and Ranga Reddy districts if one were to take a cursory look at the registration numbers.

One cannot help but notice that a major beneficiary of bifurcation, albeit unintended, is a GMR group company that is the concessionaire that built and operates most parts of NH 65 on a toll basis. The increased traffic directly benefits the company. However, if the present trend indicated a reverse capital flow from Hyderabad, the company may find it more profitable to sell their road concession in the next 3-4 years and shift to other highway routes – like Chennai-Kolkata, which has reportedly reaped maximum economic benefits after the bifurcation.

Skyrocketing real estate prices

The travellers, based on their dress and physical appearance, are mostly from the more affluent sections of Seemandhra. Hotels en-route are packed. The discussions, at least those overheard at the breakfast table, were invariably about rising real estate prices in Seemandhra, especially in the districts of Guntur, Krishna and West Godavari. That part of AP is witnessing massive interest from speculative real estate investors since the new capital is expected to come up there.

Interestingly most of the locals and old timers in the real estate business are unhappy about the rising prices partly because they could find themselves outbid due to rampant speculation over land and property prices. There are very few people who are actually buying and selling property. The only people buying are those with insider information about location of major projects or those with large amounts of unaccounted money at their disposal.  

Speculative high tide has truly lifted all boats. Parcels of land which had no buyers for 8 lakhs/acre at the same time last year now command a price of 80 lakhs to 1 crore/acre. On the highways and in places within a radius of 25 kilometres from Vijayawada city limits it is impossible to find land priced less than 1.5 to 2 crores/acre - even for lands with forged documents. One year back, people would have jumped at the opportunity to sell some of the land in more distant parts (20-25 kilometres from Vijayawada) at 50 lakhs. Even in places that are  5-8 kilometres beyond the city limits land is being sold at not less than 4 crores/acre.

Also there is widespread speculation by Rayalaseema faction leaders themselves. They are no stranger to strong arm tactics, used with impunity in Hyderabad to artificially inflate property prices. Their active involvement in this murky business has scared whistle blowers who fear that they might be forced to sell off land that may have been purchased through genuine deals. In fact, the rise of these strong-armed players introduces a new unknown variable into the real estate market that now makes protecting land a major headache for property owners.

Case in point – A gated community

The case of a gated community is illustrative of the changed fortunes of a handful of entrepreneurs and politicians. A local company that has interests in areas as diverse as real estate development to airlines completed a massive apartment complex consisting of many apartment blocks located close to the Acharya Nagarjuna University about 3-4 years ago. They were reported to have sold barely 30% of the project. The prices jumped by nearly 50% to about 50-70 lakhs for a three bedroom apartment as soon as the Congress Working Committee (CWC) passed the Telangana resolution. The apartments sold out easily and the present asking rate for a resale now exceeds a whopping 1.5 crore. In other parts of Vijayawada, a “decent” three-bedroom apartment costs nothing less than 80 lakhs. A “luxury” apartment would sell for 1.5 crore. The local definition of “luxury” differs drastically from other large cities. They do not have facilities like swimming pools or recreation clubs usually taken for granted in luxury gated communities in metropolitan cities like Hyderabad.

Exploding real estate prices have touched all parts of Krishna, Guntur and West Godavari districts. In Krishna district, is not possible to find land that cost less than 10 lakhs/acre. Even a year back one couldn’t have thought of selling the same land at 2 lakhs/acre. To top it all these villages have no physical infrastructure in place – metalled road are non-existent and these villages are the first ones to be evacuated during cyclones.

Stepping stone to disaster?

Unfortunately the areas where speculation on land and property prices have hit fever pitch also form the most fertile parts of Andhra region. In certain areas that are now at the centre of speculation, ground water is available at less than 50 feet. At this pace, the region is likely to lose nearly 50000 to 100000 acres of high quality cultivable land to non-agricultural uses over the next few years. This loss of agricultural land will only increase if a large part of the three districts are transformed into a State Capital Region on the lines of Delhi National Capital Region (NCR) as has been reported in some sections of the media.

One is yet to come to terms with the likely impact of these developments on the economic life over the next few years. Unlike in Telengana and the dry districts of Seemandhra not many people in the region own land and those who own land often have small land holdings. Even people who earlier owned large parcels of land have sold it off as the next generation have migrated elsewhere, leaving no one to oversee the land personally.

The major constraints for the growth of Vijayawada are natural obstacles and the concentration of large pieces of real estate in the hand of the top 3%. If the last twenty years of Vijayawada’s history is any indication, an overwhelming part of the small holdings in the three districts are likely to disappear in a few years. Reverse flow of capital will bring with it a wave of new residents in the urban centres which will bring its own set of problems. Unless the government starts its preparations now, Seemandhra’s urban centres may be stepping into a disaster. 

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