A lot has already been said about the formation of Telangana & Andhra Pradesh. Rather would want to talk about things that feel have not been spoken about enough. Two issues are rather disturbing at this point in time.
First is the issue of bifurcation itself. Whereas the entire world is speculating about the same but one would have felt better if both the new states sat on the negotiating table and resolved all bifurcation issues. Sure all things cannot be divided in a day but a good start can be made. Rather than talk about development now, first proper division should be talked about. Both the new leaders should show the maturity and vision by talking to one another about the division. Feel that majority of the points up for division could be resolved or more importantly divided amicably. A few sticking issues would remain but the process of dialogue should go on. Would be happy to first see both leaders resolve division. Let us not forget that both states benefit and suffer due to this division. If division is not done properly then development work may not be able to start in right earnest.
The central government has shown the way for such reconciliation. After all the poll rhetoric about neighbouring countries and sticking issues, the first they did is inviting all neighbours to start the process of discussions once again. If India can start talking with Pakistan again then see no reason why both our 2 new states cannot talk. The perception being given out currently is that the current division process is acrimonious. Before relationships can be improved, both will have to improve perceptions. For a normal real estate market to flourish normal and stable conditions should be available in both states and that is possible only through amicable and friendly division.
Both the states have still to realise that whatever one may do, one cannot choose ones neighbour. We cannot change our neighbourhood but can jointly work to improve the atmosphere in the neighbourhood. Either we can have a great neighbourhood atmosphere in which both can gain from the ensuring peace or else create a pain for everybody else.
Before development, comes proper division which if not done properly cannot ensure that both states start on the right note. This is the time to show statesmanship and political vision.
Second is the issue about the cry for development. If you drive around Hyderabad, you will see boards congratulating both the new governments and hoping for development. The development war seems to be first being fought on the city's hoardings. Another fall out of this cry is that unnecessary speculation is building up again. Recently a realtor was sharing that he negotiated an industrial plot of approx. 3500 sq yds in Vijaywada in Jan 2014 at Rs. 5200/- per syd. Post Parliament clearing the AP Reorganisation bill, the deal had to be renegotiated and the price achieved was Rs. 8400/- per syd. Now closer to registration the price is almost touching Rs. 9500/- per syd.
Anybody will be happy to see this kind of price increase but this is not a healthy price increase. Such unnatural price increases will make development work more difficult if not impossible.
A classic case of similar over expectations is the Shamshabad airport area of Hyderabad. Everybody was lining up buying land in this area in 2006-08 period. This area was the hotbed for all speculative activity. In reality this area today is nothing more than a graveyard of half-baked projects, disappeared land sharks etc. Majority of the investors in this area have lost their money.
The only project completed in this area is MAK Resorts. We are given to understand they had a tough time selling because they were not only selling their project but also battling the negative perception about this area.
Don't think have seen any other airport vicinity so barren and development less as Hyderabad's. The Bangalore airport which is on the same highway is a better case study of development. You just have to drive from the Bangalore airport to Hebbal junction and you would notice all major brands putting up commercial and residential projects on the airport road. Maybe it is a good case study for us to ponder on. Am sure speculation happened there also but it is a fact that development is also happening there.
Around the Hyderabad airport for miles we have just good roads but nothing else. We just wasted a good opportunity to plan and develop a good & modern suburb for Hyderabad. Part of the reason for this mess is the unhealthy speculation that was allowed to go one for years around the airport project in Hyderabad. Even within the airport confines except for the terminal and Novotel, no other development has come up. The airport cannot develop in isolation and am sure the airport planners would have hoped for better peripheral development which would have had a positive impact on the entire area.
Is the unrealistic and unregulated speculation of land rates in the new states and the new capital taking us the same route? If land cannot be bought out for development at reasonable prices then development might happen but painfully slow. Capital flows towards opportunities but not without evaluating other options. Some of the land rates figures that we read in the newspapers as are shocking. When real estate markets start behaving like stock markets then it is a clear indication of an unrealistic & illogical bubble being built-up.
Though we do not advocate for the state to monitor real estate prices but some kind system has to be made to check this sought of insider trading. Like in the stock markets the government monitors and regulates insider trading. In the same way some mechanism has to be set up to regulate speculation in land. Eventually when people suffer due to speculation they expect the government to do something, maybe the government could do something proactively. When Hyderabad's development story started in early 90's the land prices were a fraction of the current prices. The land prices had a steady growth till mid 2000's after which unrealistic speculation set in and later recession. This ensured that development got halted in terms on nothing new being added just the status quo being maintained. Politicians should also be careful about making development plans public, this adds to speculation. Too much speculation will spoil the party too soon for everybody else.
Land prices have to have the scope for development. If prices quoted today are high then development will become an uphill and expensive task. Development should be such that all citizens benefit and not just for the affluent section. Plans for development also have to be made considering the long terms goals that the new governments would have. Overall development of the states is more important than just concentrating on few urban centres.
Our advice to any investor wanting to invest is to monitor the price trend for the past 6-12 months. If the price movement seems unrealistic then be careful with your investments. When everybody you know seems to become a real estate consultant it is best to stay away from the market and let the markets cool down.