Amravati: After a spike in land prices, will the city see an uptick in commercial real estate?

According to data from ANAROCK, nearly 8,859 acres of land are designated for commercial and industrial development in Amravati.

Politics has had a big role to play in Amaravati. To begin with, N Chandrababu Naidu as chief minister in 2014 anointed it as the next capital of Andhra Pradesh, after Telangana was carved out of Andhra and existing capital Hyderabad was demarcated to be in the new state.

However, Naidu's successor Y.S. Jagan Mohan Reddy’s government in 2019 scrapped the plan, proposing instead that the seats of the judiciary, legislature and administration be in different parts of the state.

With Naidu back in the saddle, Amaravati has once again been declared the sole capital. Not surprisingly,  land prices in the city almost doubled to Rs 6,000-7,000 per sq ft following the general and assembly elections, and with plans to develop the city back on the table.

Experts point out that the recent shift in the state government's stance on Amaravati's development is a positive sign. With infrastructure projects getting back on track creates a stable environment for businesses to invest. Additionally, the government's focus on attracting key industries through incentives and establishing business districts can act as a major catalyst.

However, a steady infrastructure and high-ticket investments are required to boost commercial and industrial real estate in and around the city, experts point out.

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Infrastructure needs a boost to determine real estate outcome

"While the previous Naidu government had already commenced several public infrastructure buildings like court premises and public offices, an investment of more than Rs 9,000 per year is required to complete the first phase of the capital development," National Real Estate Development Council (NAREDCO) national president G Hari Babu said.

Earlier, on June 16, the state's minister for municipal administration and urban development P Narayana said that the development of Amaravati in three phases will cost Rs 1 lakh crore and would be completed in two and a half years.

"Amaravati's commercial real estate has the potential for significant growth in the mid to long term. The key will be effective government action, attracting major players, and capitalising on planned infrastructure development. If these factors align, Amaravati has the potential to become a prominent commercial hub in Andhra Pradesh," Prashant Thakur, regional director and head, research at property consultancy ANAROCK Group told Moneycontrol.

Babu added that the bridge over the Krishna, connecting Amravati and Hyderabad, has already been inaugurated. And this will be a game changer in attracting more investments to the commercial real estate sector. "Additionally, the proposed Amravati Ring Road and the airport near Visakhapatnam will also add to attracting several investments into the sector," he added.

Unlike Hyderabad, affordable land parcels available 

According to data from ANAROCK, nearly 8,859 acres of land is designated for commercial and industrial development in Amravati. This includes 6,143 acres for commercial areas and the remaining for industrial use.

"Amaravati boasts of significant land availability, including both government and private holdings. This abundance provides ample options for companies to set up industrial units, warehouses, or large-scale commercial projects. Amaravati also has a sizeable workforce, and the focus on developing a knowledge-based economy can further attract skilled professionals. This readily available talent pool will be a major draw for companies looking to establish a presence in the city," Thakur added.

Brokers in Andhra Pradesh also pointed out that even after the recent price surge, land continues to remain largely affordable compared to the neighbouring real estate hub of Hyderabad. "Average real estate prices in Amravati hover around Rs 6,000-8,000 per sq ft while the prices in Hyderabad have touched more than Rs 10,000-13,000 per sq ft," GV Jagdish, a Hyderabad-based officer with Hanu Reddy Realty said.

Moreover, experts point out that Telangana has been focusing on the services sector, leveraging its strengths in pharmaceuticals and the IT/ITeS sectors, while Andhra Pradesh has the opportunity to explore the other sectors, focusing on its inherent strengths.

"The recent developments provide opportunities to tap a new set of investors and offer dual opportunities for the respective states, especially in Amravati where real estate activity has remained muted for most of the past two to three years," said Anshuman Magazine, chairman and CEO, India, Southeast Asia, Middle East and Africa, CBRE.