Road Ahead For Relaunched Amaravati

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE

Following the initial buzz about Amaravati as the capital of Andhra Pradesh, the flow of investment and real estate activity has remained  muted for the past about three years. Though the relaunch of Amaravati by the new government in Andhra Pradesh has raised fresh hopes, the development may see cautious response from the investors and would not significantly impact Hyderabad real estate sector.  

The concept of Amaravati as the capital got a setback after the need was felt for a three-capital concept of Visakhapatnam, Vijayawada and Kurnool, based on the decentralised development model. The administration of the State of Andhra Pradesh has been functioning in Vijayawada/ Amaravati for the past several years post-bifurcation, although the Andhra Pradesh (AP) reorganization act provided for Hyderabad to be the joint capital of AP and Telangana for the initial period.

Hyderabad has growth drivers in IT/pharma and other service sectors. It is the 6th largest urban conglomerate in the country in terms of population. It is India’s bulk drug capital and contributes significantly to bulk drug production and IT exports.  Hyderabad is ranked 4th in the number of high-net-worth individuals. Hence, the city of Hyderabad has charted its course and will be dependent on Hyderabad’s growth dynamics. Since the state administrations and growth drivers have been functioning independently in the respective states, the impact on Hyderabad’s real estate would be minimal.

Amaravati Capital Region was earlier conceptualized as a planned City between Vijayawada and Guntur. Incorporating sustainable concepts would present an excellent opportunity to develop a world-class green field city and embracing modern concepts would be the key positive takeaway. However, the region’s growth remained muted recently due to the focus on Visakhapatnam. The growth in Amaravati would be dependent on implementing the plan envisaged for the region in the future and the issues emanating from such implementation.

The sectors and areas of focus for the two states are different, although some segments may overlap. The State of Telangana has been focusing on the service sector, leveraging its strengths in pharma and the services/IT sectors, while the State of Andhra Pradesh has the opportunity to explore the other sectors, focusing on its own inherent strengths. The recent developments provide opportunities to tap a new set of investors and offer dual opportunities for the respective states.

After the initial buzz due to Amaravati being the state capital and the real estate investments in Amaravati, the activity decreased considerably after the government announced the three-capital formula. Therefore, the real estate activity in Amaravati has remained muted for most of the past two to three years. As per some estimates, about 50,000 acres of land inventory is available including government & private lands.

However, in the short term, the demand for lands in the capital region of the state will increase after the recent announcement of Amaravati as the sole State capital. However, in the long term, the demand for the land will depend on the momentum in activities/infrastructure development pushed by the government.

Since Hyderabad was the capital of Andhra Pradesh before the bifurcation, investments moved around, and businessmen with roots in AP have invested in the Hyderabad real estate sector. This has continued post-bifurcation and with Hyderabad’s growth. Some business groups would be looking for long-term opportunities in AP/ Amaravati. However, this wouldn’t significantly impact the Hyderabad real estate sector, and its growth path will be based on its growth drivers and the momentum behind Hyderabad that would drive investments.

The new government has announced Amaravati as the capital region and is reinforcing its commitment to develop the city on the lines that were envisaged earlier. The initiative is being led by the top echelons of the government and therefore, there would be a buzz in the short-term in the real estate in the neighbouring areas. However, the investors would be cautious while finalizing the investment plan and would thoroughly evaluate the long-term repercussions, continuity of the policy, and other enabling environments provided by the state government before committing significant investments.

From an industry standpoint, the IT sector believes that a slew of measures should be undertaken to give the sector a renewed push. The industry is also keen on developing Vizag as the IT Hub in the state, including the development of space for IT companies and high-speed internet connectivity. Also, there are calls for the development of the required infrastructure, such as economic clusters near Vishakhapatnam.

The new government would provide the enabling environment by providing the necessary budgetary support/ funds for the construction of the required infrastructure and other developments as per the master plan prepared by the government earlier. This would enable the consolidation of the people, businesses, and governmental infrastructure to boost growth in the region. Thus, the government plays a pivotal role in the development of the new capital region. In particular, the government’s ability to create an investor-friendly ecosystem required for businesses to flourish, including developing service-oriented industries, educational hubs, and knowledge-based industries, would be critical in developing a new metropolis.