Vizag Market - Price Correction

The realty sector in Visakhapatnam, after experiencing a lull for the past 2-3 years, has been showing signs of revival in the last few months. It is estimated that 1,500 or more apartments may have been sold in recent months in the city, and a spurt in is also noticed in the sale of plots on the outskirts.

The downward trend began in 2007 when most of the projects stalled. Companies which purchased land in bulk auctions conducted by the Visakhapatnam Urban Development Authority (VUDA) at high prices of Rs 5 crore or more per acre could not take up the projects. Even now there are no major housing projects under construction in the city or the outskirts, except one, Haritha, taken up by the VUDA in association with Singapore-based Jurong. .

Smaller projects

The smaller apartment projects which got stuck during the slow period have been completed by the builders. There has been a price correction, by 15-20 per cent in the city limits, and above 20 per cent on the outskirts, making it more affordable for the middle-class to purchase apartments.

According to Mr Narasimha Rao, an architect, it is the affordability factor which has led to the current spurt in sales. “Builders have realised that it is no longer possible to sell apartments at the rates witnessed during the boom period. They have cut their margins and there has been a price correction. Still, I feel there is room for a further cut. At present rates, however, the apartments are within the reach of the middle classes,” he says.

Mr Subba Raju, chairman of the Visakhapatnam Apartment Builders' Association, has said that the smaller housing projects within the city or on the outskirts have been completed. “These projects were stuck during the past two or two-and-a-half years. There has been a price correction, making it affordable for the middle classes. But I don't think there is room for any further cut.

“Construction costs are on the rise all the time. It is a welcome feature that most of the stalled apartment projects are nearing completion or have been completed. We are shaking off the impact of recession.”

Telangana effect

In response to a question whether the recent political developments relating to a separate Telangana state have had any bearing on the realty sector here, Mr Subba Raju said excessive importance should not be attached to the Telangana factor. “The Visakhapatnam-Kakinada coastal belt is attracting investment on a large scale in recent times and the growth of the realty sector depends on the pace of these projects primarily rather than political developments relating to Telangana. Of course, Telangana is one of the factors to be taken into reckoning but it should not be exaggerated,” he opines.

Mr Narasimha Rao is of the view that there is no likelihood of any artificial boom in the Vizag region because of the Telangana factor, but it will have a bearing. “Visakhapatnam and Nellore are attracting a lot investment in recent times and the trend is likely to continue, regardless of the Telangana developments, but the political factor may have an impact on the pace of the projects,” he has said.

There is also a view that the Telangana factor is more relevant tothe Vijayawada-Guntur region than the Vizag-Kakinada belt. An artificial boom in realty prices is more likely in the former than the latter.