On the main road off Venkatapalem, 12 kilometres from Vijayawada, two men sat outside a brightly painted concrete shed. An orange and purple sign advertised their services as land brokers. Both declined to be photographed or even identified, but spoke at length about how Andhra Pradesh's plans to build a new capital had changed their lives.

One was a Telugu Desam Party supporter, the other a CPI(M) man. Each owned two acres of land. They had been inspired to become brokers about a year and half ago with the announcement of a bypass road from their village to the nearest small town, Mangalagiri.

But the real bonanza came in August last year when Andhra Pradesh Chief Minister Chandrababu Naidu announced that the state would build a new capital, Amaravati, in the area between Guntur and Vijayawada. This was a consequence of the Central government's decision in May 2014 to carve the new state of Telangana out of Andhra Pradesh. Andhra's old capital, Hyderabad, was situated in territory that had been accorded to Telangana. For the next ten years, both states will share Hyderabad as a joint capital. By the end of that period, Andhra Pradesh hopes to have finished building the core of its new headquarters.

“Everyone has become a crorepati even with one acre,” the TDP man said. “Those who sold their land can repay their debts, build up their houses, buy chains, bracelets. We have started buying mutton and we have cell phones. We have stopped cultivating our fields now.”

Booming business

Business shot up for the two brokers with Naidu's announcement as people outside the region rushed in to buy land that is expected to soar in value when Amaravti eventually gets built. Between them, the two men have facilitated sales for people from Vijayawada, Hyderabad, Gujarat and Mumbai.

“People like me have established offices, but now new brokers are coming up like worms,” one man said. “In one village there are around 50 people into brokering. The business has grown so much that we can’t do business by ourselves anymore.”

A real estate advertisement in Penumaka.

But while outsiders are bullish about the new capital, locals are divided about it.  Opinions on the capital city, the two brokers say, are largely based on how residents expect to profit or lose from it. The Andhra Pradesh government plans to build the capital city on 33,000 acres of land south of Vijayawada. Instead of using land acquisition laws, it has set up a land pooling scheme: owners will give their plots to the government in exchange for a ten-year pension and a smaller parcel of developed land in the new capital. The value of the developed land, with water and power connections, will be much higher than even the future market rate of agricultural land, the state government has promised.

Those who support the land pooling scheme, the brokers say, had land that was worth anything from Rs 10 lakhs to Rs 50 lakhs per acre. Now, with the surge in demand from outside, all land in all 29 villages that will be merged into the new capital can sell for around Rs 1 crore per acre. Conversely, the ones who oppose the project have land that was already worth Rs 1 crore – either for its fertility or proximity to the urban hub of Vijayawada. These landowners believe they are not getting a good enough deal.

Land pooling begins

As chief minister of undivided Andhra Pradesh, Chief Minister Naidu was credited with orchestrating Hyderabad’s rapid growth in the information technology sector, which led to a boom in the city and the development particularly of its northwest suburbs.

His election campaign in Andhra Pradesh after bifurcation played on this reputation. If anyone was to build a rival to Hyderabad, who could be better than the one who made the city great in the first place? The gamble worked and Naidu has been working overtime since then to deliver.

Much has transpired since Naidu’s announcement. The land pooling scheme was supposed to formally end on July 31. On October 22, Naidu will lay the foundation stone of Amaravati. The city will cost an estimated Rs 1 lakh crore to build.

A new hope

India does not have an exceptional track record in building new cities, or even satellites to existing ones. Naya Raipur and Gandhinagar, administrative hubs adjoining Raipur in Chhattisgarh and Ahmedabad in Gujarat, become ghost cities at night. Navi Mumbai, the much-vaunted twin to Mumbai that was meant to ease its burden on infrastructure and population, only began to grow organically around a decade ago, many years after it was deemed to have failed.

Chandigarh is possibly the only exception. This, says MG Devasahayam, an IAS officer who was closely involved with the city's development, was due to a number of elements that the planned Andhra Pradesh capital does not have.

Chandigarh, he said, was planned to be a city with low buildings and a low population density. Built soon after Partition, it had a ready population of displaced Punjabis with movable capital who were able to develop the city. On the other hand, the plans for the Amaravati project is to have high rises. If the city is to build up all the 33,000 acres the government has pooled, it will require a much higher population to occupy the planned homes.

Devasahayam contends that there will not be enough people for Amaravati, particularly because the city will come up between two existing urban centres, Vijayawada and Guntur. "In Amaravati, you won’t have more than 1.2 million people for 100 years, especially because there are already towns around the area," he said.

In a move that was widely regarded as a coup for the state, the Andhra Pradesh government signed a memorandum of understanding with the Singapore government in December to develop a master plan for the city. The Singapore government passed on the work for this to two private companies, Jurong International and Surbana International Consultants. Singapore will construct the core capital region comprising government buildings, in exchange for receiving 10,000 acres of land in other parts of the city which it will develop for real estate. That amounts to about a third of the land being pooled.

At the same time, Naidu also sought Japanese investment. In July, Yoichi Miyazawa, the country's minister for economic trade and industry, said that Japanese firms were interested in funding the construction of the city. His own ministry has promised to fund some of the city's Metro transport network.

A Sivareddy, president of CREDAI in Andhra Pradesh.

But those who will eventually construct the city – the local builders likely to subcontract from foreign investors – are hedging their bets.

“The Andhra Pradesh government is doing a real estate business [with the capital city],” said A Sivareddy, president of the Andhra Pradesh chapter of the Confederation of Real Estate Developers’ Associations of India. “There is no city in history made like that where you build all the buildings and people will shift there. People will move in only as per their need. You cannot make them move.”

The involvement of multinational companies also rankles with Sivareddy.

“Why is there a need for Singapore to come here?” he asked. “Sixty five percent of people here depend on agriculture. Singapore does not have even a glass of water. They have to import everything. So how will they know what is required here?”

Harish Rambabu, a relatively new builder in Vijayawada, also associated with CREDAI, feels that builders will definitely benefit from the capital, if not immediately, then in five or ten years.

“Most builders want to enter area to build high rises for small projects,” Rambabu said. “I would want to enter later because we do not know where the assigned plot of land will be. It makes sense to wait until we can choose the best land and site, even if there is a 50% increase in price.”

Who profits?

There is no clarity on how long it will take for the city to eventually be built.

“Local people might suffer because they are losing their land and employment,” Rambabu said. “Will they sit idle for 10-15 years? What will they do? Builders are expecting good business, but I don’t think local people are as happy as the government is telling.”

Anxiety about this interim construction period stalks even those moved by their trust in TDP and the promise of good compensation to support pooling their lands.

For now, the government’s plan seems to be to leave houses in villages undisturbed and simply work on converting agricultural land into the base for an urban habitat. On July 20, when Singapore released its final master plan of the seed capital area, it seemed as if only  three villages would be removed entirely, to be replaced by administrative buildings for the capital.

One of these villages was Lingayapalem. On the morning after the plan was unveiled, almost all men in the village disappeared for a long Panchayat meeting. By afternoon, three television crews had descended upon the village.

“They say they will give us 1,400 square yards, but they are not telling us where,” said K Subbarao, 61, a TDP supporter who owns 1.5 acres in Lingayapalem. “The government says one thing and does another by force. What can we do?”

A television crew at Lingayapalem.

But the division in Lingayapalem along party lines is evident.

A man who had sold his two acres of land to buyers soon after the capital city announcement said nobody knew whether to trust the government. He declined to be identified.

“They said they would not take away village lands, now they are taking ours,” he said. “Why should we trust the government? They will say one thing now and another thing later.”

As he spoke Subbarao grew agitated. “Don’t listen to him,” he insisted. “He is of the other party, that’s why he is saying these things.”

That said, both were pleased that the value of their plots had gone up. “My land was worth only Rs 60 lakh before the capital city was announced,” Subbarao said. “Now it is worth Rs 1.5 crore. Is that not a huge profit?”

But this erasure of their differential edge is precisely the reason some people in other villages are opposing the scheme.

“Our land which is so valuable is now getting the same package as lands that cost Rs 25 lakh,” said Santhosh Reddy, who owns two acres in Penumaka. “We do not know when we will get out land back. People are willing to fight it in the courts.”

There are other concerns in Penumaka. Srinivasa Reddy, who owns 1.25 acres, was not certain where they would get this land.

“Everyone is worried about this,” he said. “We do not know whether we will get this in the [main] capital area or somewhere else [in the outskirts].”

Neither of the Venkatapalem brokers plan to move at all. Until the city comes up, they intend to continue transactions with small plots of land.

The TDP supporter asked, “Why will we go anywhere when everything is coming here?”