Host of issues haunt realty sector in the State

The real estate sector across Andhra Pradesh is impacted by numerous issues and the wait-and-watch approach by consumers is making promoters impatient. While some market players resort to offering desperate discounts, others prefer to bide their time.

The industry is chiefly hit by demonetisation, glitches in GST and problems in The Real Estate (Regulation & Development) Act, 2016 (RERA), prolonged development plans in the Amaravati capital region, collection of VAT and land scams in places like Visakhapatnam. Despite 20% average dip in pricing, there are not many buyers, according to the industry players.

“There is a clear dip in demand and corresponding reduction in pricing. The first blow was demonetisation, which dried up all the liquidity that is necessary for the survival of the real estate industry. And then we had GST which is still Greek and Latin for many. On the top of it, we have 1.25% VAT which is collected in most of the Registrar offices across AP,” said a Vijayawada-based real estate businessman Rajesh (name changed).

This apart, land registration manipulations and scams in Visakhapatnam and Guntur further made potential investors cautious.

For instance, as per a conservative estimate, there are about one lakh residential flats either under construction or completed in the AP capital region. About 20,000 acres of land is converted into plots in the same region. Industry pundits say there are no buyers visible in the region and demand for plots is worse.

Demonetisation, VAT, GST

Demonetisation, VAT and GST have greatly impacted the industry and things have become more difficult after the RERA, according to the Confederation of Real Estate Developers Associations of India (CREDAI), AP Chapter president A. Siva Reddy.

“Many Registrar offices are collecting VAT in the GST regime which is wrong. We gave a representation to Finance Minister Y. Ramakrishnudu requesting him to represent our case with the Centre. We wanted a 5% composite tax scheme in the new system,” Mr. Reddy said.

Happening places like Visakhapatnam, Tirupati etc., show some demand owing to necessity of employees to buy properties, but there is no demand at all in the most hyped up places such as Vijayawada due to no action on the ground. There are not many employees to create demand in Vijayawada and surrounding places and so there was no substantial business for the industry according to the CREDAI president.

Less demand, heavy discounts

The dip in demand is clearly reflected in the major and minor realty projects in the capital region in and around Vijayawada. A couple of big ticket projects, which are selling units at over ₹2 crore each, could not market even half of their inventory in the past one year.

There was another project which came up with an attractive proposal of paying customers’ EMIs for two years if they book the property in their venture. The realty firm has tied up with a private bank to facilitate such offer. The response is said to be moderate despite heavy concession as per sources.

Not many takers

There are a couple of other real estate ventures in Rajamahendravaram, about 150 km from Vijayawada, which offer residential flats and independent house properties at rock bottom price compared to the ones in other regions of the State. “These properties, with such an attractive price, are advertised for over nine months. There seems to be no takers even at that price as we see the ads still hitting several TV channels on daily basis,” said M. Vijay Kumar, a businessman in Rajamahendravaram.

While the government functionaries and political leaders assure that the situation is expected to ease in the short term, the realty firms with huge inventory remain the worried lot. Given the uncertainties, the bankers are also seen exercising caution while extending loans according to the industry sources.

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