Budget bonanza: Land prices in Amaravati may shoot up by 40-50 percent in 1-2 months, say experts

Experts add that already they were seeing property values go up with the new government at the helm.

The recent Union Budget’s financial support for Amaravati has put the Andhra Pradesh capital’s real estate sector back on the radar. Experts say land prices may shoot up by 40-50 percent after FM Nirmala Sitharaman's Rs 15,000 crore allocation to develop the state capital and its infrastructure.

Adding to the anticipated land price hike, National Real Estate Development Council (NAREDCO) President, G Hari Babu, said that while the state requires Rs 50,000 crore for the next five years to develop Amaravati, the initial allocation will boost the state's ongoing ring road construction to attract real estate majors.

"In the last 2.5 years, the city saw an expenditure of about Rs 9,800 crore. With Rs 15,000 crore being allocated just for one fiscal, the city will see a major boost in its infrastructure to develop into a greenfield city," he added.

Local brokers add that post-budget on July 23, the queries for affordable land parcels - which hovers around Rs 2 crore-3 crore per acre - have almost doubled in some areas.

The big budget announcement

Finance Minister Nirmala Sitharaman said on July 23, "Our government has made efforts to fulfil the commitments in the Andhra Pradesh Reorganisation Act. Recognising the state's need for capital, we will facilitate special financial support through multilateral agencies. In the current FY, Rs 15,000 crore will be arranged with additional amounts in future years."

Sitharaman said that the government is also committed to completing the Polavaram project, which is an under-construction multi-purpose irrigation project on the Godavari River in the Eluru and East Godavari districts in Andhra Pradesh. According to the Reorganisation Act of 2014, this venture, like Amaravati, will also receive financial assistance from the Centre.

Affordable land prices, land availability

Local experts say that before the bifurcation of Andhra Pradesh and Telangana, former CM Chandrababu Naidu had already acquired more than 33,000 acres from farmers and started building the city.

In 2014, the land rates in Amaravati hovered around Rs 15-20 lakh per acre and shot up to Rs 2.5 crore before the government change in 2019.

However, since then, the city saw investments falling, and real estate prices dropping almost 50 percent—and in some areas, 60 percent—in and around Amaravati.

Anuj Puri, Chairman of ANAROCK Group believes that there was a visible slowdown and demand became tepid in the last five years with the change in government. This also impacted prices with many areas seeing a dip in land prices. Investors such as the World Bank and AIIB also withdrew their investments after the 2019 assembly election results.

"The government has already acquired 33,000 acres of land from the farmers. With additional land that already existed in the state government's portfolio, the city has more than 40,000 acres of land ready to be developed according to the master plan," Babu said.

In fact, experts anticipate that after the Budget, the state government will acquire an additional 25,000 acres of land to push the city limits of Amaravati.

The budget impact

Experts add that already they were seeing property values go up with the new government at the helm. "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," Puri added.

Local brokers in Andhra Pradesh said that the initial real estate queries have already commenced after the Union Budget -and in some cases doubled in certain parts of the city.

"Just yesterday, one of the clients mentioned that land prices are being quoted at more than Rs 7 crore per acre in parts of the city's educational hub areas. This is much higher than an average land price of Rs 2 crore-3 crore in Aamravati," G V Jagdish, a Hyderabad-based senior realtor at Hanu Reddy Realty told Moneycontrol.

Over 2,100 acres have been earmarked for developing Amaravati as an educational hub to attract educational institutions and research centres.

Experts say that Amaravati will grow like Hyderabad which boomed on commercial developments in the IT-ITeS sectors. "We are yet to see how the funds will be utilised, however, we need to see how the demand-supply dynamics will play in the city's real estate sector that will actually lead to the price hikes," Abhishek Bhadra, Head of Research at Magicbricks explained.

Besides commercial estate, experts say that the industrial real estate sector in Amaravati will also have the potential for significant growth, fuelled by renewed government focus and the city's master plan vision. This will eventually lead to high growth in residential real estate as well.