Kathmandu:The real estate in 2011 witnessed both building as well as demolishing of hopes.The sector has been slack and slumbering since 2010, with transactions flattened to around 40 per cent. However, the past year maintained the prices of the prime areas, despite the sector seeing around 25 per cent less transactions in housings.

Prakash Bajracharya, managing director of Bajra Shangrila Residency, says, “Currently, housing sector owes Rs 2 billion to financial institutions. This year, bank loan interest rose up to 16 per cent from that of last year’s 10 per cent, which is making it immensely difficult for us to break even.

To add to it, construction costs have not decreased at all, though land prices have plummeted down. So, I would not consider 2011 to be much of real estate year.” According to Bajracharya, realty prices have gone down by 10 to 15 per cent this year alone, continuing last year’s trend. “Nevertheless, with load shedding kicking in and dollar getting stronger, the construction cost is up by 15 to 25 per cent. It is difficult to adjust prices between our investment and returns. The provision of Non Resident Nepalis (NRNs) and foreign citizens buying property as stipulated in this fiscal year’s budget has become a myth, with price ceiling too high to afford.”

Adding to this, Real Estate Expert Om Rajbhandari opines that real estate and liquidity policies need to be revaluated by Nepal Rastra Bank (NRB), if the sinking industry is to be saved. According to him, housing deficit is soaring by the day and if efforts are not made to uplift real estate, we will soon see Kathmandu evolve into the `slum capital' of the world. He adds, "Not that the industry has no prospect to flourish, but NRB directives are so discouraging that buyers have lost confidence to invest in real estate. Though exact numbers can't be revealed yet, a preliminary survey we carried out on 52 housing projects showed substantial fall in sales." As per Rajbhandari, the sector could flourish again if backed by proper policies supporting real estate loan and secondary transactions. He says, "Hassle free investment for up to Rs 10 million may help the industry recover within just few months."

The year was not altogether dismal, as innovative approaches were made in the sector. While the budget seemed to bring slight relief to real estate, some other significant instances were the launch of Realtors  a pioneer professional broker agency, inclusion of foreign citizens in the purchase of vertical property in Nepal worth over USD 200,000 and the Panchakanya Real Estate Expo held from August 25 to August 28 in the capital.

Dilip Neupane, vice chairman of Realtors, says, “In 2011, large companies and land holders who owned huge amount of land indulged in land cartel, making it quite out of reach for the general buyers. Moreover, owing to the rumours that land prices would fall, people were hesitant to invest in the sector.” According to Neupane, the market study reveals that pricing is determined and projects launched without any feasibility study. The financial institutions are involving themselves directly in the business and real estate developers and plotting agents are ranked at the same level, increasing the distance between buyers and suppliers. Neupane adds, “It is time for policymakers to understand the need for organised brokers, who not only make the process hasslefree but conduct proper property evaluation before it is advertised in the market. I’m sure that the sector will prosper once it is organised with reasonable pricing and begins working through the channel of official brokers.”

Agreeing to the other views, Nepal Land and Housing Developers’ Association (NLHDA) also considers the year to be overshadowed by despair. Min Man Shrestha, general secretary of NLHDA and chairman of Downtown Housing Pvt Ltd, says, “The year was quite dismal, but both NRB and state are gearing up to bring about relief packages to strengthen the sector. The ceiling for home loan has been raised to Rs 10 million and policies are being revaluated to bring about gradual changes rather than a drastic one.” On an optimistic note, he expressed hope that the coming year would usher in smooth landing with less loopholes in speculation and control mechanism.

Though the realty sector struggled hard in 2011, owing to the fragile economy and complicated directives, those engaged in the sector have not given up hope of recovery and better days in 2012.

source: Koirala, Sneha (2011) ,"2011: The realty reality", The Himalayan Times, 31 Dec 2011