The real estate business has been struggling to pick up pace since the last Poush month when the central bank issued a directive to curb realty transactions. The latest directive was aimed, on the one hand, at setting measures for the real estate and house loan exposure of financial institutions and on the other, to raise interests by five or six percent. As per the directive, the financial institutions will have to keep their real estate and house loan exposure to 30 percent of the total loan exposure by the end of this fiscal year 2067-68 and to 25 percent by the end of the fiscal year 2068-69. After the issuance of the directive, the number of those getting license for building commercial houses and apartments has seen downward spiral in the Kathmandu valley. During the nine months after Poush, there have been only eight companies who have secured the license for building apartments in three districts of the valley. Similarly, the number of builders receiving approval for constructing commercial colonies stands at just four. Similarly, during the said period, only six companies received license for land plotting. During the first eight months of last year 2066, the number of those getting license to construct apartments was 13. Similarly, during the period, 17 companies got approval for building colonies and 5 companies received license for land plotting. In the first two months of the current fiscal year, only two firms received license for constructing apartment while the number of those getting approval for housing and land plotting stood at one each. The directive has certainly created ripples in the real estate sector. It has also impacted small loan clients as they will have to pay higher interest on their loans. They cannot avoid the juggernaut of costly interest because they have agreed in their loan papers that they are agreeable to floating interest rates. According to real estate developers, as the bank and financial institutions (BFIs) adopted stringent policy regarding realty lending as per the directive on the part of the Nepal Rastra Bank (NRB), they are facing financial crunch to accomplish the ongoing projects leave alone the new ones. The developers now seem to be more worried about completing the projects still under-construction to clear the dues to their lenders. Capitalising on easy financing from financial institutions, they had been able to do well in their business before the central bank directed BFIs to tighten their screw on realty lending. Even general people had developed a tendency to buy land, however small, in the hope of selling it at a higher price in the future. However, with restrictions in place regarding disbursement of real estate and house loans, even a greater flow of remittance money cannot spur real estate and housing transactions, said experts. The real estate sector is, undoubtedly, a risky sector. Despite this, investment in this sector had literally grown out of hand, which could subsequently prove disastrous to economy. As such, it was mandatory for the central bank to intervene to prevent the real estate bubble from bursting out, they argued. Likewise, the transactions of land in the valley have also plunged steeply. According to an official estimate, the land transactions have fallen down by a shocking 50 percent this year compared to last year Source:nepalnews.com
The real estate business has been struggling to pick up pace since the last Poush month when the central bank issued a directive to curb realty transactions. The latest directive was aimed, on the one hand, at setting measures for the real estate and house loan exposure of financial institutions and on the other, to raise interests by five or six percent. As per the directive, the financial institutions will have to keep their real estate and house loan exposure to 30 percent of the total loan exposure by the end of this fiscal year 2067-68 and to 25 percent by the end of the fiscal year 2068-69. After the issuance of the directive, the number of those getting license for building commercial houses and apartments has seen downward spiral in the Kathmandu valley. During the nine months after Poush, there have been only eight companies who have secured the license for building apartments in three districts of the valley. Similarly, the number of builders receiving approval for constructing commercial colonies stands at just four.
Similarly, during the said period, only six companies received license for land plotting. During the first eight months of last year 2066, the number of those getting license to construct apartments was 13. Similarly, during the period, 17 companies got approval for building colonies and 5 companies received license for land plotting. In the first two months of the current fiscal year, only two firms received license for constructing apartment while the number of those getting approval for housing and land plotting stood at one each. The directive has certainly created ripples in the real estate sector. It has also impacted small loan clients as they will have to pay higher interest on their loans. They cannot avoid the juggernaut of costly interest because they have agreed in their loan papers that they are agreeable to floating interest rates. According to real estate developers, as the bank and financial institutions (BFIs) adopted stringent policy regarding realty lending as per the directive on the part of the Nepal Rastra Bank (NRB), they are facing financial crunch to accomplish the ongoing projects leave alone the new ones. The developers now seem to be more worried about completing the projects still under-construction to clear the dues to their lenders. Capitalising on easy financing from financial institutions, they had been able to do well in their business before the central bank directed BFIs to tighten their screw on realty lending. Even general people had developed a tendency to buy land, however small, in the hope of selling it at a higher price in the future. However, with restrictions in place regarding disbursement of real estate and house loans, even a greater flow of remittance money cannot spur real estate and housing transactions, said experts. The real estate sector is, undoubtedly, a risky sector. Despite this, investment in this sector had literally grown out of hand, which could subsequently prove disastrous to economy. As such, it was mandatory for the central bank to intervene to prevent the real estate bubble from bursting out, they argued. Likewise, the transactions of land in the valley have also plunged steeply. According to an official estimate, the land transactions have fallen down by a shocking 50 percent this year compared to last year
Source:nepalnews.com