How Andhra Pradesh’s new capital (around village Thullur) is becoming a real estate haven…

Picture is worth 1000 words and economists should use them to make a point as well.

S. Ananth, an independent researcher from Vijaywada has this superb pictorial article on the topic:

The announcement by the Andhra Pradesh Chief Minister Chandrababu Naidu that the new capital will be located in and around the village of Thullur, about 25 km from Vijayawada, has dramatically altered the socio-economic dynamics of these sleepy villages. Until the announcement these villages were considered to be little more than backwaters of the main city. The following photos attempt to highlight the rapid pace of change over the past five months.

The mainstay of these villages was agriculture and petty commodity production where they grow vegetables, fruits like guava and bananas, paddy, sugarcane, cotton and in a few cases flowers. In the more fertile villages, vegetables are the most important corps. Abundant supply of water is an added advantage: in certain areas, groundwater is available at about 50 feet. During monsoon, groundwater is available at about 30 feet. Earnings can be as high as Rs 1.5 lakhs per annum (in the case of those growing vegetables). High level of investment in education is a marked feature in all the villages.

In almost every village, a common way to bide time is to gather at a common point (usually near a temple or panchayat office) and “discuss” everything under the sun. One such gathering of elderly people in Thullur village.

Locals believe that the present village housing blocks will not be brought under land pooling for the new capital. Residents of Thullur village point out that the chief minister has promised to “develop” their common areas in a different way: regeneration of the lakes, addition of walking tracks around the lakes, development of parks, temples, etc. One of them was confident that each village will have an “outer perimeter” beyond which land and development of the capital will be taken up – creating pockets of the “old village” within the “modern” capital.

The announcement of the capital in the region has literally shaken the area from its stupor. The pickup in construction activity immediately catches a traveller’s eye. The road from Vijayawada to Thullur village indicates the rush to construct shops and apartments, especially among villages that are close to Vijayawada city. A large number of apartments are coming up on the road from Vijayawada to AP capital region villages. Almost all the apartments advertise their bank approval prominently. It is indicative of the manner in which information asymmetry works or is perceived to work. High cost of apartments means that buying agricultural land is still attractive. Unlike in other cities, a luxury apartment means one that has a large carpet area with a few fittings thrown in as a perk. Most of these apartments now cost three times the cost in early 2013.

Before any development, housing prices shoot through the roof.

Cases of land grabbing and cheating have sprung up as well:

A visit to these villages seems to indicate that real estate and ancillary service industries are the only business that interests people – at least, those willing to venture into a business. Everything seemingly revolves around land: people are either keen to buy land, sell land, mediate between the buyers and sellers or offer some service to those trying to fix a deal. The attempt to make a quick buck from real-estate speculation seems to encompass all classes, castes and overshadows everything else. The urgency to close a deal is indicative of the thinking that the good times are unlikely to last long.

A discernible feature is that of roadside kiosks that have now taken to real estate broking because it is a more profitable occupation. These include kiosks that in the past served as a tailoring shop, dual-purpose units like a motorcycle repair kiosk that doubles as a real estate broking office, a bicycle repair kiosk to one that stored agricultural equipment.

The business logic is impeccable and incredibly simple: even if one land deal can be intermediated and the transaction completed, then the commission earned (about 1% of the deal value) is often more than the incomes earned by most over the past one year. In other cases, the obsession of the region’s middle classes for “extra-income” with little or no “investment” other than their labour is satiated. In most of cases, it only requires drawing on one’s social capital and social networks.  

The influx of brokers from outside the villages is easily discernible. A year ago, most of these villages had only the occasional visitor – mostly connected with the agricultural commodity trade. Most of these brokers are from neighbouring cities like Guntur and Vijayawada. Residents blame these outsiders for all the fraudulent land transactions in their villages

An abnormal rise in land prices have resulted in instances of land grabbing. Land grabbing or threats related to purchase and sale of land was unheard of in the region. There were the occasional civil disputes that would snake their way through the courts. A rare dispute related to completing a land transaction was usually “settled” through the informal arbitration mechanism, which usually consisted of the local elite presiding and mediating the two sides – the anthropological equivalent of the “big man” or the “elder”. However, the influx of outsiders means that the “local big men” or “elders” do not control the social levers that they did in the past and are helpless to arbitrate in any dispute.

The picture below is a flexi-banner notice issued by the Superintendent of Police at a bus shelter warning people about and against land grabbing. Of course, a real estate agent uses that as a good place to market himself and his business..

Hype and more hype..

 

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