The real estate sector posted a notable growth in transactions since the beginning of the current fiscal year, indicating a resurgence in the buyers’ confidence. After a four-recession, the realty business is bouncing back, thanks to easier financing, low bank interest rates and stable real estate prices. The rebound in land and building deals is shown by the 26.43 percent rise in revenue collection from property registrations in the first half of the fiscal year.
According to the Department of Land Reform and Management (DoLRM), Land Revenue Offices (LROs) across the country collected Rs 2.87 billion in registration fees in the first six months compared to Rs 2.27 in the previous year.
As far as the revenue collection target during the review period is concerned, LROs surpassed it by 34 percent. The objective for the first six months was Rs 2.14 billion but collection reached Rs 2.87 billion.
Bankers and realty traders said there has been a rise in realty loans, particularly home loans. “Personal home loans have gone up and interest rates have also come down,” said Anil Gyawali, chief executive officer of Nabil Bank.
Interest rates on home loans have gone down to below 10 percent. “Even for apartment projects, the interest rate has come down to 11.5 percent from the peak of 16 percent,” said Min Man Shrestha, general secretary of Nepal Land and Housing Developers’ Association. He said genuine developers are receiving loans from banks easily these days, but loans for land development are still hard to get.
According to the NRB statistics for the first five months of the current fiscal year, lending to the residential construction grew 7.1 percent, while that for non-residential construction rose 1.7 percent. “It has been five years since the recession struck the real estate sector, and it is now time for revival,” said Shrestha.
Looking at the trend of revenue from land registration over the last five years, revenues from realty transactions had plunged to Rs 4.71 billion in fiscal 2010-11 from a high of Rs 7.01 billion in 2009-10 after Nepal Rastra Bank (NRB) intervened to cool the overheated sector terming the growth as artificial.
Going by the half-yearly figure, revenue collection from realty transactions is likely to exceed the target for the entire fiscal year. The government has aimed to earn registration fees amounting to Rs 4.5 billion in this fiscal. The collection so far represents 63.77 percent of the year’s target. “The revenue target will surely be surpassed this fiscal year,” said Raju Basnet, a section officer at the land reforms department adding that realty transactions usually go up in the second half of the fiscal year. The farming season usually keeps people busy during the first half, according to him.
“Also, the Constituent Assembly elections led to a slowdown in transactions during the first half, and dealings are expected to jump in the second half,” he said. According to Basnet, if the current momentum continues, revenues might exceed the Rs 5 billion mark with ease.
The five LROs in the Kathmandu valley—Dilli Bazaar, Chabahil, Kalanki, Lalitpur and Bhaktapur—handle around 50 percent of the realty transactions in the country said the DoLRM. The Tarai accounts for 30 percent and the hilly and mountain regions 20 percent.
Iccha Bahadur Wagle, vice president of the Nepal Land and Housing Developers’ Association (NLHDA), said that the realty sector had gotten over a rough patch, and that if a new government was formed by parties advocating a free economy, the sector would witness further growth. “If the central bank loosens controls on the realty sector during its review of the monetary policy, the market is ready to grow substantially,” said Wagle, adding that NRB should permit banks to issue more loans than the currently set cap. Banks and financial institutions have been ordered to limit loans to the realty sector to 25 percent of their total loan portfolio.
According to Wagle, small land plots situated around 3 km from the Ring Road in Kathmandu, Bhaktapur and Lalitpur are on the rise these days. Transactions of big plots, however, are yet to witness a significant boom.
Developers attributed the growth in transactions to a correction in land prices which had skyrocketed during the realty boom. “A plot costing Rs 500,000 around five years ago is trading today at Rs 600,000 posting a slow growth. The market has witnessed a price correction, and buyers too are now willing to make purchases,” said Wagle.
Source: The Kathmandu Post