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As per the new Nepal Rastra Bank (NRB) directives, the exposure of financial institutions to real estate should not cross 25 percent and together with housing loans should not cross 40 per cent. The new directive requires banks not to issue loans more than 60 percent of fair market value of the collateral/project. It has also set timelines for financial institutions to minimize their exposure to real estate and housing loans. Due to these, financial instituion are facing pressure to reduce their loan exposure in real estate. They have started to offer higher interest rates more than 10 percent the banks to attract deposits.
The real estate interests will rise as high as 18 percent said Ram Shanta Shrestha, chairman - Nepal Finance Companies Association.
According to Nepal Land and Housing Developers Association (NLDHA) Chairman Ichhaya Raj Tamang, government should have imposed such rule before.
In recent past, the price of land in nepal has increased upto 300 - 400 % in major cities such as Bhairahawa, Butwal, Nepaljung, Chitwan, Pokhara, Dharan, Itahari, Dang and Jhapa. 'This new directives will control such unusal rise of land prices' said Ichhaya Raj Tamang.
Experts comments that it would put pressure on land and housing dealers operating with banks loans to repay their loan. However, the price of land and houses in Kathmandu will not decrease as there are limited land availabile. But this new policy will certainly decrease the number of transactions and effect those real estate dealers who sell land by just making initial booking payment.
Nepali banks and finance companies have invested billions of rupees, approximately Rs 50 billion in the real estate sector.