Revise cap, interest rate on realty loans: Developers
KATHMANDU, March 12: Land and housing developers on Friday urged bankers to push Nepal Rastra Bank (NRB) to revise cap on realty loans and get it set at 40 percent for banks and 50 percent for development bank for the next two years. Holding a meeting with Nepal Bankers´ Association (NBA) officials, they even appealed to the bankers to prescribe NRB to gradually allow them lower realty loans exposure by 5 percentage points, ultimately setting it at 25 percent for banks and 35 percent for development banks. Officials of Nepal Land and Housing Developers´ Association (NLHDA) placed such a demand, as the central bank´s cap on realty loans along with liquidity crunch sharply squeezed loans availability and also rendered loans expensive. NRB directives ask banks to limit realty loans exposure to 40 percent by this fiscal year end and 25 percent within three years. “The provision has not only hit new projects but also threatened to affect projects unveiled in the past,” said Ichchha Bahadur Wagle, vice president of NLHDA. He told myrepublica.com that the developers strongly put their concerns during the meeting because their problems, if not addressed now, will have grave impact on banking system and economy as a whole. During the interaction that NLHDA organized on Thursday, developers across the country had argued that tight lending policy and dramatic rise in interest rates had rendered a large number of housing projects unviable now. “This has disabled our capacity to develop and sell houses. In such a situation, how does the government expect us to repay loans?” the developers had argued, and urged NLHDA to launch a strike, pressing for a change in policy. As a part of the developers´ demand, NLHDA officials on Friday also demanded the banks to operate with spread rate (difference between borrowing and lending rates) of less than 3 percent. They also flayed the banks for jacking up the realty interest rates to 17 percent, which is some two-fold of what they operated with some six months ago. They tagged the hike as ´unfair´ and demanded the banks not to raise rate by more than 2 percentage points for old loans. “We have no complaint of banks charging 17 percent for new loans, but for the old loans, such a hike should not exceed two percentage points,” said Wagle. Developers also demanded the banks to pledge loans up to 80 percent of the fair market value, raising it from the central bank´s cap of 60 percent. Likewise, they demanded the banks to exclude home loans taken by individual clients from the realty loans. If this is done, developers believe it will substantially alter loans portfolio of banks and financial institutions, enabling them get more loans. The bankers, who listened to their demands patiently, however, did not make any commitment to the developers because their demands largely sought changes in policy, which is not in their hand. “We will push our demands to NRB and Ministry of Finance as well,” said Wagle.
Source: Republica