NEW DELHI: Skyrocketing real estate prices could scupper Andhra Pradesh chief minister N Chandrababu Naidu's plan of having a sprawling state capital around Vijayawada.
Land prices in and around the city have risen sharply especially since the state was bifurcated three months ago. In a radius of about 15 km from Vijayawada, it is hard to get an acre of land for anything less than Rs 10 crore today— this is higher than many places around Hyderabad. In the heart of the city, land prices have nearly doubled in the last eight months to about Rs 1.3 lakh per sq yard.
While Vijayawada doesn't have many highrise apartment complexes, apartments on the outskirts are being sold for Rs 2,500-3,500 per sq ft. "But at current prices, we might not be able to afford that price anymore," said C Shekar Reddy, managing director of CSR Estates. According to experts, at current prices, builders will not be able to sell apartments within the city at less than Rs 9,000 per sq ft, which is as much as the price in the posh Banjara Hills area of Hyderabad.
On the outskirts, apartment prices will not be less than Rs 4,500 per sq ft if built on land purchased at current prices. However, Reddy said, "But people's purchasing power isn't growing at nearly the same pace. It is hard to sell at Rs 2,500 per sq ft today. It will be impossible to sell at higher prices."
Earlier, speculation that the new capital would be between Vijayawada and Guntur had seen several local businesses, politicians, investors and other HNIs from across the country picking cheap land in the area. Land, according to real estate brokers and builders, was available for as low as Rs 5-10 lakh an acre in most parts around Vijayawada. Now there is nothing available for less than Rs 5 crore.
"This doesn't make economic sense. Most developers we have spoken to are not interested in Vijayawada. Even corporate clients are not interested in setting up shop at the moment because of the lack of social infrastructure," said Sandip Patnaik, managing director for Hyderabad at property advisory firm JLL.
Siva Reddy, president of Confederation of Real Estate Developers' Associations of India (CREDAI), Andhra Pradesh, said land prices in Vijayawada are even higher than in Hyderabad.
"It is not sustainable to build anything here at the moment. Land cost is too high." A similar scenario had played in 2007-08 around the new airport in Hyderabad at Shamshabad. There too, investors and speculators had bought land at rock bottom prices, with the aim of booking profit once the airport was commissioned. Prices climbed initially but came down after a few years of inactivity. "We don't see any point in going to the area at the moment. It looks impractical," said Prem Kumar, managing director at Hyderabad-based Doyen Constructions.
Kumar said he had approached several land owners in and around Vijayawada and even given advance to buy land. But when he went back to finalise the deals, the landowners demanded more money.
"I left it at that. We are all waiting to see what happens in the next one year," he said. The CM had said last week that the new capital of Andhra Pradesh would be in the Vijayawada-Guntur region. The city itself, along with Visakhapatnam and Tirupati, will be developed as a megacity, while another 14 cities will be developed as smart cities.