Vijayawada: Exponential surge in demand for Rental Property post Q2 2014

Following the declaration of Vijayawada being selected as the new capital of Andhra Pradesh there is expected to be a drastic change in the realty scenario of the city. Even though it is still early days as far as the development of the city is concerned, speculations are rife that there is going to be a drastic upturn in realty prices. This was reinforced by the increase in demand for Rental and Sale property listed with CommonFloor, especially post Q2 2014.

Figure 1 shows the change in the proportion of demand for Sale and Rental property in Vijayawada between Q1 2014 and Q3 2014, compared to Q4 2013. The proportion of demand in Q4 2013 is taken as the ‘base’. The proportion of demand in the subsequent quarters is compared with respect to the ‘base’ values.

Analysis of trend

Based on the comparative analysis of the demand for Rental and Sale property in Vijayawada, it can be seen that there is an increase in demand for Rental and Sale property, post Q1 2014 (as seen in Figure 1). While the increase was gradual for both Rental and Sale property from Q1 2014 to Q3 2014, the demand was considerably steep for Rental property, post Q2 2014. Demand for property listed with CommonFloor started going up in Q1 2014 following the passing of the Bill regarding the bifurcation of the State in February. With the formal division taking place in June, the next step was with regards to announcing the new capital. Vijayawada was the front runner in the capital race due to the infrastructure facilities as well as the availability of large parcels of government land surrounding the city. The surge in demand for Rental property in Q3 2014 can be attributed to the apprehensions held by prospective tenants regarding a sudden increase in rental prices following the capital decision.

Figure 2 shows the proportion of demand for Rental and Sale property in Vijayawada between Q4 2013 and Q3 2014. It can be seen that the proportion of demand for Rental property after a dip between Q4 2013 and Q2 2014 saw a stupendous increase in Q3 2014. The demand for Sale property also increased steadily between Q4 2013 and Q2 2014.

Analysis of trend

Based on the trend seen in Figure 2, we can arrive at some important conclusions. It can be said with a fair deal of certainty that the drastic increase in Rental demand post Q3 2014 was due to Vijayawada being declared the capital. The apprehensions felt by prospective tenants with regards to an exponential rise in rentals following the capital decision lead to the surge in demand for Rental property. The increase in demand for Sale property between Q4 2013 and Q2 2014 can be attributed to the availability of apartment projects which were already completed or nearing completion. The prospect of apartment prices increasing following the capital decision also prompted prospective buyers to make haste before the prices of these projects increased.