AP’s loss is Telangana’s gain: A contrasting tale of sibling Telugu states

While Andhra is fast losing the plot, Telangana is witnessing an unprecedented boom, particularly in the real estate sector

Telangana, Andhra Pradesh, YSRCP, TRS, TDP, YS Jagan Mohan Reddy, K Chandrababu Naidu, real estate
The list of projects being shelved in Andhra is growing by the day while new investments, from both domestic and foreign companies, have been pouring into Telangana, particularly Hyderabad over the last few years. Photo: iStock

One man’s adversity is another man’s prosperity. This appears to be the case with the sibling Telugu states of Andhra Pradesh and Telangana. The flight of capital from Andhra is proving to be a bonanza for Hyderabad, the economic powerhouse of Telangana.

A slew of policy moves by the Jagan Mohan Reddy government, guided more by political vindictiveness than developmental interests, has created a negative narrative in Andhra, scaring away investors. Several high-profile companies have exited the state due to the ‘unfavourable business climate and whimsical decisions’ of the government.

While Andhra is fast losing the plot, Telangana is witnessing an unprecedented boom, particularly in the real estate sector. This can be largely ascribed to investors from AP.

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The list of projects being shelved in Andhra is growing by the day while new investments, from both domestic and foreign companies, have been pouring into Telangana, particularly Hyderabad over the last few years. The construction and real estate sectors are booming in India’s youngest state while they have fallen flat in Andhra after the Amaravati dream has gone sour.

Telangana is rolling out the red carpet for Singaporean companies to make investments in the state in the backdrop of the exit of a Singapore consortium from the Amaravati capital city start-up area project.

According to the January 2020 Knight Frank report on the real estate sector, Hyderabad is the only Indian city in the global top 20 in-home price appreciation in the third quarter of 2019. It was also ranked second among the top 20 global cities in JLL’s City Momentum’s Index (CMI) 2019.

Gloom versus Boom

When Andhra Pradesh was bifurcated in 2014, many thought that there would be flight of capital from Hyderabad to residual Andhra since a majority of big industrialists and businessmen hailed from coastal Andhra region. Six years down the line, the reverse is happening.

Jagan’s animosity against his bete noire TDP chief Chandrababu Naidu seems to have got the better of him in his penchant for reversing or scrapping the earlier government’s initiatives, upsetting the business applecart in the process. Several projects have been shelved in the process.

Lulu Group International, a United Arab Emirates-based conglomerate, has announced that it has no intention of making any fresh investments in AP, “given the current scenario.”

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The announcement followed a decision by the state cabinet cancelling allotment of land made to Lulu Group during the TDP regime for developing an international convention centre in the port city of Visakhapatnam. The company was to invest ₹2,200 crores to build an International Convention Centre, a shopping mall and a five-star hotel to provide global exposure to the city as a convention and shopping hub and create nearly 7,000 jobs.

A Singapore consortium, comprising Ascendas-Singbridge and Sembcorp Development, exited the Amaravati capital city start-up area project after the government terminated a contract signed with it by the previous government. The consortium, was set up in 2017 to develop a 6.84-sqkm start-up area in the new capital in three phases over a period of 15 years.

Adani Group’s ₹70,000 crore solar-powered data storage and technology park in limbo. The company has ignored the government’s directive to submit an alternative proposal.

Indonesia’s Asia Pulp & Paper (APP), which entered into an MoU with the state government last year for one of the biggest Foreign Direct Investments in the country, amounting to ₹24,000 crore for a greenfield pulp and paper plant in the state’s Prakasam district, is understood to have withdrawn its plans.

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Despite being a businessman himself, having interests in infrastructure, power and media sectors, Jagan appears hostile to striking business deals and networking with potential investors.

The previous TDP government had promoted Andhra Pradesh as ‘sunrise state’ across the globe and was successful in attracting big-ticket investments such as Kia Motors to the state. Naidu was a regular participant at the World Economic Forum at Davos and created a buzz around the opportunities in the state.

As a result of his efforts, Andhra Pradesh stood fourth in attracting Foreign Direct Investments in the first nine months of the fiscal year 2019 (April – December 2018), ahead of Tamil Nadu and Gujarat, according to the Department of Industrial Policy and Promotion data.

Jagan, however, is yet to show any appetite for attracting investments like his predecessor. The Economic Development Board, established by the Naidu government as a nodal point of contact for investments in the state, has been put in limbo since the new government came into power in May last year.

Investments Galore

On the other hand, Telangana’s successes are attributed by the Indian Brand Equity Foundation (IBEF) to a slew of policies and advantages like rapidly improving infrastructure and initiatives relating to the IT and electronics sectors.

According to a report of socio-economic outlook-2020, the realty sector of Telangana has attracted investments worth ₹37,667 crore in the last five years under the Telangana State Industrial Project Approval and Self-certification System (TSiPASS). A majority of the investments were made in the IT corridor in Hyderabad.

Telangana’s IT exports touched Rs 1.09 lakh crore in 2018-19, outstripping AP’s total exports of ₹98,983 crore.

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According to official data, Telangana’s real estate sector has employed a record 7.21 lakh people in the last five years.

Hyderabad saw a burst in investments in 2018, attracting three times as much private equity than the previous three-year period, says Satish Vadaga, Hyderabad city lead at Anarock Property Consultants.

Experts point out that multiple factors have come together to make realty sector resilient in the city: Focus on infrastructure, political stability, and policy reform.

The property prices in Hyderabad are relatively lower compared to other metropolises like Mumbai and Bengaluru. This gives the city a competitive advantage in terms of real estate investments.

Amazon has set up its largest-ever campus outside the US in Hyderabad. It now proposes to set up two data centres at an estimated cost of ₹11,000 crore.

One of the largest pharma companies, Piramal Group, has come forward to invest ₹500 crore to expand its operations in Pharma City on the outskirts of Hyderabad. India’s biggest medical devices hub and pharma cluster are also on the anvil.

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