The festive season is probably the best pretext for Nepalis to go shopping for every thing from clothes to cars and maybe even houses. However, this time around, the real estate sector has not been able to attract enough clients. Although the sector had placed high hopes on the Real Estate Expo 2011 held nearly a month ago, the number of expected visitors fell short of target.

Dekendra Shrestha, executive director of Downtown Housing Pvt Ltd, says, “The expo has fuelled a bit of hope in us, though we could not attract 100,000 visitors as per our expectation. Irrespective of that, our company alone enjoyed five bookings in the expo, which is really encouraging. Moreover, currently we are flaunting our sample apartments at Khumaltar since September 11, giving continuation to the expo fever. Ten houses have already been booked till date.
This is the aftermath of the expo -not up to the mark, but satisfactory.“

However, though much is being hyped about the shrinking costs of real estate, the prices of housing and land are still relatively high and that is probably putting off prospective buyers. At the expo too, claims were made of prices being lowered, but the truth was that the area and spaces were reduced as well.Several clients declared such deals unattractive. To add to customers' woes, bank interest rates have also been hiked to 15 per cent.

According to Shrestha, the escalating interest rates are creating difficulties in fulfilling market demand.
“Housing loans are usually limited to four to five per cent globally, and are generally two to three per cent lower than that of other business loans. This is rational, as housing is a basic human need. But in Nepal, it has reached 15 per cent -if it were lowered to around 12 per cent, business would be slightly more bearable.

Moreover, only 20 to 25 per cent of the total apartment cost comprises of land. The rest is construction cost. So, price adjustments are tough, as we have to compromise with quality if price is to be reduced.“According to Shrestha, housing companies have maximum profit margin of 15 per cent.

Meanwhile, consumers are becoming insecure about their investments in the real estate sector. Prabha Khanal, a prospective buyer, says, “Land was a great investment opportunity just few years ago. But due to the uncertain market and fluctuating prices, we are not investing in land any more. Investing in it now seems to be a fairy tale due to outrageous prices and dizzying interest rates.“

This is the story of all prospective clients, who are shying away from such risky investment.

Agreeing with this, Prakash Acharya, first vice president of NLHDA, says, “Currently, the prevalent psychology is that real estate prices will further decline, and hence there is halt in all active purchases. One of the reasons for this is the over licensing of financial situation in the past. We are yet to notice any boost in the market, despite the realty expo held nearly a month ago -during which the sales did not enthuse either. Our company, Homeland Housing, did not receive a single booking.“

Sharmila Shahi, senior manager of Sunrise Apartments, also accepts that the real estate market is passive. She adds, “The Real Estate Expo 2011 did not enjoy bookings as in the past. So there is not much to be happy about, as competition is tough and the market is not showing any positive signs of growth. However, we are trying to garner prospective customers.“

For this, she explains, “As it is the festive season, we are offering 20 per cent discount on full cash payment within 30 days of booking.Moreover, our single bedroom apartments of 1450 sq feet are targeted at working couples, and it is quite a decent space for two people to enjoy comfortable living. As this is the season for house purchases, we are hopeful that the market will soon be redeemed.“

However, as the real estate struggles to find a ledge to prevent itself from a fall, it is yet to instill confidence among buyers by sending out positive signs of recovery.

source: Koirala, Sneha(2011),"Building castles in the air:Realty won't have much to cheer this festive season", The Himalayan Times,18 September 2011