Impact of Amravati Real Estate Market on Hyderabad Realty: Review by ANAROCK Property Consultants

Impact of Amravati Real Estate Market on Hyderabad Realty: Review by ANAROCK Property Consultants

Amravati is among the youngest capital cities in South India and the state government has ambitious plans for the city. However, the development of Amravati has been slow compared to investor expectations. A review of Amravati real estate by ANAROCK Property Consultants follows.....

It is still too early to predict the immediate impact of the slow development in Amravati on the Hyderabad market. The City of Nawabs - as a standalone - is already on the radar of institutional investors and has been witnessing immense activity over the last few years. Regardless of whether or not development takes place at Amravati, Hyderabad will continue to thrive on its own unique advantages.

AP's Strong Fundamentals

In the Ease of Doing Business (EODB) ranking by the Department of Industrial Policy and Promotion, Andhra Pradesh was ranked second with a score of 70.12% (only after Gujarat) in 2015.

With an impressive performance on the fronts of the single window system, tax reforms, construction permits and advance automated solutions to deal with the environment and pollution-related applications approvals, it secured the top ranking in the EODB ranking for 2017 and 2018.

The state’s gross value added (GVA) grew by 31% from INR 2,70,964.5 million in 2013-14 to INR 3,54,067.2 million in 2016-17. Further, per capita net state domestic product witnessed a significant jump from INR 82,870 in 2013-14 to INR 1,42,054 in 2017-18, a whopping growth of 71%.

Bridging the Gap Between the Old and New Vision

Over the past five years, Amaravati has created a brand name for itself globally. At present, a lot of administrative and legislative services are operated from the city.

To bridge the existing budget gaps, the government is actively looking for investments for several projects. These include the state’s 972 km coastline, six operating ports and airports, 123,000 km of the road network, and 2,600 km of rail line network for opportunities in maritime, logistics, and processing sectors.

Recently, the Chief Minister also hosted a diplomatic outreach program in Vijayawada to showcase the potential of the state, which was attended by 35 countries. His visit to the United States of America saw the possibility of investment opportunities with members of the US-India Business Council (USIBC) and Atlantic Council’s South Asia Centre. These developments signify a pro-business approach from the new government.

Additionally, despite the World Bank’s pull-out from the Amaravati project, it continues to support Andhra Pradesh with over $1 billion approximately (INR 6,900 Crores) in areas that cover the health, agriculture, energy and disaster management sectors.

The Way Forward for Amravati

The original development plan of Amaravati was spread across three phases – the first phase from 2015-2025, second from 2026-2035 and the third from 2036-2050. Cities are not built overnight, and developing a new city from scratch is especially time-consuming.

Vadim Rossman, a Russian author, explains this process in his book 'Capital Cities: Varieties and Patterns of Development and Relocation". He writes, 'building new cities is always a long-gestation, intergenerational project, and it sometimes takes over 100 years for cities to come to life.” Citing the example of Washington DC, he explains that the master plan for the capital city of the United States was completed only about 100 years after the city was founded.

In the transition from one government to another, even the best-laid plans sometimes go awry. There has been a dip in the focus on Amaravati - but the present government reviewing the master plan for Amaravati, this city may still achieve some of its vision of becoming a model for India's future.

No doubt, development in Amravati has slowed and investors are in a wait-and-watch mode with even the World Bank and AIIB backing out from the project. While the current government is re-strategizing the development and reviewing the plan, one major silver lining in this slow growth is that speculative real estate price trends will remain curtailed.

This is a good thing. Since the time the capital city was announced, prices there saw two-three-fold jump - a similar dynamic was seen in certain pockets of NCR at some point. With speculation receding, more genuine market trends will follow.

The debate about Amravati and its eventual fate continues, and the situation remains fluid. Only the time will tell whether headwinds or tailwinds blow for the star-crossed Amaravati market.

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