PE funds, NRIs invest cautiously in new capitals : Knight Frank

PE funds, NRIs invest cautiously in new capitals : Knight Frank

Investors who have risk appetite would look towards these cities for long term returns.

Sharath Chowdary

Though the Government of Andhra Pradesh is aggressively trying to attract global investments for the development of the new capital city, investors are adopting a "wait and watch" approach to invest in the projects of the nearby urban centres like Vijayawada and Guntur.

Private equity (PE) firms and non-resident Indians (NRIs) are observing the developments taking place in and around the new AP capital – Amaravati. Being cautious on the returns, they are still evaluating the growth prospects of the city, Knight Frank India Chief Economist and National Director-Research Samantak Das told The Dollar Business Bureau.

He had released a detailed report on the two upcoming state capitals - Amaravati (AP) and Naya Raipur (Chhattisgarh), on Wednesday. The report highlighted the potential of the two greenfield capital cities, and the ripple effect that these cities would have on the real estate development in the surrounding areas.

According to Das, PE firms see the trend of return on investments before investing in a city’s real estate sector. The urban centres around Amaravati and Naya Raipur are still upcoming markets. PE firms or NRIs prefer investing in commercially developed markets such as Mumbai, Pune, Bengaluru and New Delhi.

Expressing similar views, Knight Frank Hyderabad Director Vasudevan Iyer said, “Vijayawada and Guntur, the two major urban centres near Amaravati, are still speculative markets. The real estate trend here is similar to the boom seen around the National Capital Region (NCR) few years back. Investors who have the risk appetite would look towards these urban growth centres for returns in longer horizons.”

Speaking about the AP government’s efforts, Das said, “The state government is trying its best to build the new capital city. The proposed greenfield capital city has already generated unprecedented interest in the surrounding areas and the two urban centres of Vijayawada and Guntur are the biggest gainers of this immense interest.”

“AP government is planning in a well-balanced manner and focusing on the overall development of the state, without compromising on agricultural lands. Vijayawada is being promoted as the commercial capital, Guntur as the knowledge centre, Visakhapatnam as an IT & ITeS destination and Sri City (Chittoor and Nellore) as manufacturing hub of the state. Investors may go for joint ventures or joint development of the projects in the state,” Iyer added.

Due to its strategic location and the proposed infrastructure developments, Amaravati will surely become a world class city and an influence zone. International consultants are involved in developing this capital city. As per the report, few investment commitments are already made by national as well as foreign companies that include Suzlon Energy, Walmart, Pepsi, Colgate-Palmolive and Amity University.