The Andhra Pradesh government’s decision to place a reserve bid of ₹1,452 crore on the sale, through open auction, of a prime parcel of land in Visakhapatnam has been met with astonishment locally. The 13.59 acre plot on Beach Road was earlier allotted to UAE-based conglomerate LuLu by the Chandrababu Naidu government, but is now being sold through NBCC (India) Ltd, a blue-chip enterprise owned by the Union Ministry of Housing and Urban Affairs.
At ₹106.80 crore per acre, if the auction is successful, Visakhapatnam – which is set to be the administrative capital of the state – will overnight become one of the most expensive cities in India in which to buy property. Interested parties should submit their bids by April 22.
The Beach Road property is one of several parcels of land that the government wants to sell to raise funds for infrastructure development. It was once a proposed site for an international convention centre and a LuLu shopping mall. But the Jagan Mohan Reddy government cancelled the agreement with LuLu Group, signed in 2018 when Naidu was chief minister.
While canceling the deal, the new government announced that it would build a 30 lakh square foot complex and market it at Rs 6,500 per square foot.
However, it soon shelved that plan, and decided to auction the plot. Interestingly, about 1.5 acres of the plot that belonged to a private group was acquired by the previous government following its agreement with LuLu. The government gave plots at three different places to the company on a land-for-land principle.
CREDAI (Confederation of Real Estate Developers’ Association of India) national vice-president G Ram Reddy expressed surprise that the reserve bid had been set so high.
”Such rates are unheard of,” he said. “Every now and then we see such premium rates in Mumbai and Gurgaon for small chunks of land. But a plot this big? It will be interesting to see who buys it and what they use it for,” he said.
The per acre price in leading cities is around ₹60-₹70 crore, Reddy said.
Two CREDAI leaders The Federal spoke to ruled out participation by local developers.
“A site bought for ₹1,500 crores needs an investment of around ₹10,000 crore,” a builder who did not want to be quoted said. “Only international players have such deep pockets.”
Realtors and builders said they were worried about the cascading impact of a successful bid. “It will become the new benchmark price for Vizag. Generally, when there is a huge deal, that becomes the model. Buying land at such rates for real estate will be unviable,” another builder who also did not want to be named said.
CREDAI Visakhapatnam unit president B Srinivas said locals could get squeezed out of the market if the trend continues. “The highest price in Vizag was Rs 1.3 lakh per square yard until recently. I am talking about central locations,” he said. “Now it is about Rs 2.20 lakh per square yard. Prices will get more expensive if the auction is successful.”
He said local players were interested in playing a role in the city’s development, but not in such premium projects.
Mission ‘Build AP’
The YS Jagan Mohan Reddy government, which was facing a resource crunch, launched the ‘Build AP’ scheme soon after coming to power in 2019. The initiative aims to sell properties that are not in use, to raise funds for infrastructure development. However, the scheme has been challenged in the high court.
Mallu Rajesh, an analyst, said: “A piece of land that is found not useful today may be required tomorrow to house a government office. The executive capital is moving to Vizag. A lot of land will be required for offices. If the government sells properties today, it will have to depend on private land owners later.”