The Andhra Pradesh government is planning to have joint ventures with both domestic and international construction companies for the development of its greenfield capital, Amaravati. The state government has proposed to form a special purpose vehicle, which would include Chinese, Japanese and Indian construction companies besides a Singapore firm, through a JV with a leading Indian company, sources in the know said without disclosing the names.
As per the master-plan by the Singapore government, the capital city spans an area of 217 sq km between Vijayawada and Guntur towns, and leverages resources of the Krishna river that flows in the region. And, in the last one year, land costs across the southern bank of Krishna river and in Thullur mandal have soared. Land near Undavalli, which was priced R60 lakh per acre, is now R3 crore, says a leading real estate developer from Vijayawada.
According to chief minister N Chandrababu Naidu, even local companies would be made partners in the SPV.
The land development and basic infrastructure for the capital city alone is estimated to cost about R25,000 crore, according to Srikant Nagulapalli, commissioner, Capital Region Development Authority (CRDA), based in Vijayawada. “We expect funding from various sources including financial institutions, Andhra-Telugu NRI community from the US, besides the central government,” he said, without providing details. “We expect to notify the master-plan area soon and this will provide the details of various structures that would come up, including roads and other works,” he said, adding this will trigger the master developer to commence construction through PPP.
According to sources in AP Real Estate Development Association (APREDA), construction activities in Amaravati are likely to start before the end of this year and the first phase is expected to be ready by 2018. The state government has pooled in 33,000 acres. But there is much more in the formula of land pooling activities of the AP government which has increased real estate prices by 200%, according to few estimates,” APREDA sources said.
However, the land pooling plan, to an extent of 33,000 acres, has left many farmers in the dry. Farmers from over 29 villages, who had voluntarily gave up their passionate land, are feeling the pinch from the real estate. “Majority of farmers across the Vijayawada-Guntur region are displaced and keeping fingers crossed, not knowing what is in the economics of AP government through land pooling and immediate future livelihood,” says EAS Sarma, former Union finance secretary.
Vijayawada is traditionally a trading town and lies in the prime agricultural bed of Andhra Pradesh. The main economic base being agriculture, this city has considerable potential for development in terms of food and agro industries. The model of land pooling goes back to the Gujarat model. “Under Section 6 of the AP Reorganisation Act, the Union home ministry appointed the Sivaramakrishnan Committee to suggest alternate locations that minimise disruption to agriculture and environment, cause least displacement of people, and are least expensive. The state summarily rejected the report and unilaterally decided to locate the capital in the Guntur region. Apparently, it is a statutory violation. The capital city project occupies more than 30,000 acres of fertile agricultural land.”
“There are about 40,000 farmers, agricultural workers and artisans dependent on this land. More than 120 different kinds of crops are raised. Diversion of this land for constructing buildings will destroy agriculture and adversely impact food security,” Sarma said. “The land pooling approach adopted by the state has robbed the farmers of their legitimate right to demand prior compensation and rehabilitation, and indirectly facilitated the lands slipping away into the hands of several unethical real estate land grabbers who have made huge, unaccounted-for profits. The tiller of the soil has nothing in his/her hands as of now and is forced to live on false hopes. There have been multiple land registrations which, if investigated, will reveal the facts. It is estimated that more than R15,000 crore has been laundered,” he added.
“We had multi-crop, arable land and cultivated three crops per year. But now there is no clarity and we do not know what to do for immediate income,” says a farmer from Uddandarayunipalem in Guntur district. The most affected are tenant farmers, who till the land for a period of time and earn an income. According to government officials, a farmer who has given up his land, would get R30,000 per acre for 10 years and 1,200 square yards after it is duly developed. According to analysts, the construction of capital is time-bound by 2018, much ahead of elections. “The first phase of construction will be administrative buildings to perform governmental activities. Incidentally, there is a also a committed vote bank of farmers, who want the TDP to come to power for the completion of the rest of the projects,” a political analyst said.
“One way in which the city differs is that it does not disrupt its current inhabitants. We don’t want to destroy last 2,000 years of culture. We will just build on that and move them back here.” says commissioner Srikanth.
“Land pooling differs from land acquisition. In pooling, land, not money, is the primary medium of exchange. When acquiring land, authorities sometimes have to compensate owners up to four times the value of their plots. But instead of paying four times the market rate of their land, authorities often pay them four times the registered value. This amount is usually significantly lower and does not factor in inflation over the years,” he explains.
“A survey of Amaravati and Vijayawada has revealed that speculation on the real estate market has slowed down. Price appreciation is marginal or was stagnant for some time after seeing a spike due to the announcement of the new capital and the presentation of the master-plan of the Seed Capital Area. Land transactions have slowed down currently. It is expected speculation will start again, once the foundation stone is laid,” says Trivita Roy, associate director, Research & Real Estate Intelligence Service, JLL India.
“However, Vijayawada and Amaravati are likely to witness a lot of interest from Indian and global investors. Currently, the demand for office space is weak in the city, while that for retail and residential space is good. There are no supply challenges in terms of quality office spaces, as Vijayawada has ready-to-move-in office spaces close to the airport. Further, quality retail and residential real estate is also available in the city,” Roy added.