The state government has decided to take 5% of land or its equivalent value from the newly developed layouts. The government’s decision has alarmed the realty sector and property buyers. The realtors fear that the decision would eat into their margins which have already become thin due to Covid-19 and would make their business unviable.
On the other hand, aspiring plot buyers fear that the land prices are likely to go up as realtors would pass on the burden to the consumer.
The state government had issued a GO recently stating that 5% of the land in newly developed layouts should be given to the local body. If the land cannot be given in the same layout, they can give same extent of land within three kilometres area of the layout.
The third option would be to pay money equivalent to the base price of the land in the respective areas.
The realty sector in Andhra Pradesh has been struggling with poor demand for the last three years with uncertainty over the capital city. The Covid-19 pandemic that shook economies across the globe rattled the realty sector in the state. The prices hit new lows in Vijayawada, Guntur and other major cities with uncertainty over the capital coupled with pandemic induced stress. The latest decision by the state government would put more stress on the demand side, fear realtors.
Ch Sudhakar, president of Confederation of Real Estate Developers’ Association of India (CREDAI) AP chapter, said that the state government’s decision would add more stress to the realty sector which is already struggling with fundamental problems in Andhra Pradesh. The demand is not picking up in the state when compared to neighbouring states where the realty sector is booming, he said. With poor demand, the margin has already become thin and shedding five per cent more would make several businesses unviable.
N Sunil, a realtor in Vijayawada, said that no one would agree to give land in the same layout. “We have to either buy the land somewhere else or to pay the government. Majority of realtors would prefer the third option because of various reasons. Given the present market scenario we could not even pass on entire burden to the consumer as the demand side of the market is very poor. We have to cut down our margins,” he said.
A representative of a real estate association (not CREDAI), on condition of anonymity said they are exploring legal options. “The decision of the government is arbitrary, and we will contest it legally,” he said.
