No more cuts in realty prices

The downward spiral of land prices in Kathmandu Valley has stopped after developers converged on not slashing the prices further citing that it will not help them recoup their investments.

The prices of land in the valley had dropped by as much as 30 percent in January 2011.

The trend had gained momentum, albeit for a brief period, after developers, amid soaring bank rates, chose to cut prices to lure buyers and recoup their investments. However, of late, they have agreed on withholding further cut in the prices as their initial efforts failed to lure buyers. Despite lowering the prices, transactions of land and housing in the valley continued to dip by 80 percent compared to that recorded in the same period last year.

“Buyers anticipate that prices will go down further. But with increase in lending rates, we are not in a position trim down the prices,” said Lok Bahadur Chand of Indreni Real Estate, explaining reason behind stagnant price movement of late.

As a result, transactions of property in the valley continued at slowed pace.

In January 2011, transactions had dipped to as low as 20 percent compared to a year ago, shows data of Department of Land Reforms and Management (DoLRM). It still hovers low at 20 percent of the same period last year, said Tulsi Ram Vaidya, DoLRM official.

“Transactions have remained stagnant over the last three months (the third quarter of this fiscal year) and the trend of price cut, which was witnessed in January, too has stalled for now,” he told Republica.

The collection of revenue from realty transactions by the five Land Revenue Offices (LROs) over the last three months too demonstrates market stagnantion.

According to DoLRM, revenue collections from fresh realty deals by five LROs in the valley in the month ending mid-February was just over Rs 130 million. It continued to hover above Rs 130 million in the month ending mid-March, and still stands at the same level in mid-April.

There is a general sense among buyers that prices will fall further and this has led to dramatic recoil in the demand, stated Vaidya.

Continued downturn in demand for the last 15 months, meanwhile, has strained larger land developers.

“Despite a general understanding to refrain from further price cuts, large dealers are under pressure because they will have to repay principle as well as interest from mid-July, when the fiscal year ends,” said an official at Land and Housing Developers Association, requesting anonymity.

Given the pressure, he argued the large developers might be forced to go on a selling spree in July triggering another spate of cuts in land prices.

The gloom over realty market continued after the government and Nepal Rastra Bank issued about a dozen fresh policies including tightening of loans in the sector since December 2009.

Even though the central bank, in January 2011, reopened flow of individual home loans, it made no impact on land transactions, which were mainly speculative in nature.

“Basically, the market has lost confidence of making handsome return, as in the past, through investments in land,” said Raju Niraula, promoter of Om Sairam Real Estate. “Until that confidence is restored, we do not see transactions going up,” he stated, adding that rebound of confidence might take some time.

Source;myrepublica

1Ropani