The accused admitted to have killed K Satyanarayana (35) on December 4 at the behest of one Vadrevu Venkata Surya Rao (40), the alleged mastermind behind the murder, said Anakapalle Town police inspector G Chandra.
He said Rao had allegedly been in illicit relationship with the estranged wife of the deceased who was also in real estate business.
Police said Rao wanted to kill Satyanarayana, apparently for his properties, and had allegedly promised Rs 2 lakh to the gang of one R Kanababu for doing the job. He had paid Kanababu an advance of Rs 50,000.
Police did not rule out the role of Satyanarayana's estranged wife Sarada in the murder.
"We could arrest some more persons in connection with the case after nabbing the prime accused," Chandra said.