Real Estate cooling off in Andhra Pradesh

Andhra Pradesh was hoping to rake in Rs 1800 crore from the sale of 60 acres of land. But the auction had barely any takers, reports CNBC-TV18.

The first phase of the Hyderabad Knowledge City remains unsold. The Andhra Pradesh Infrastructure and Industries Corporation had put two 30-acre plots under the hammer at a reserve price of Rs 16 crore rupees per acre and it expected the winning bid to be twice as much given the booming property market. While one of the plots received no bids at all, the other plot received only one bid at Rs 16.1 crore.

The APIIC is now awaiting the advice from the state government as to whether the plot should be handed over to the sole bidder or whether the auction should be invalidated altogether.

Hyderabad property consultants pin the blame on the new service tax on commercial rentals. This land was meant exclusively for an IT park and at Rs 16 crore an acre it would have to be leased out at Rs 55 per sq ft to break even. A rate higher than some parts of Mumbai.This coupled with a dampening of sentiment in the overheated property market would explain why the government's price was considered too high!