The flagging spirit of the housing industry seems to have boosted up again in the last few months, with a spur of bookings for apartments and individual houses. The media is once again carrying advertisements concerning real estate and new upcoming projects -of housing projects being launched and bookings now open to customers. But the reality is that realty is not really back with a bang, as it is more of a matter of survival in the present fragile economic environment.This certainly is progress from the situation a couple of years ago, when Nepal Rastra Bank (NRB) tightened the loan exposure to the real estate and housing sector. The cap has been relaxed now, and though developers believe that this move is still not sufficient to boost the sector, they are optimistic that it could kick start the business.

Developers are also marketing their products the smart way, by claiming to provide properties at lesser than the actual price. Now competition is about offering lower prices and some developers believe that companies are forced to make compromises to sustain in the business. Prakash Bajracharya, managing director of Shangri-La Housing Pvt Ltd, is one such developer who feels that there is no option left than to just put up properties for sale at minimal prices, keeping only nominal profit for oneself. “Developers are forced to offer apartments, individual houses and bungalows at lower prices because of the prevalent economic situation, as they cannot just hold them without selling,“ says Bajracharya. According to him, most apartments now being offered at lower prices compromise with the infrastructure in terms of locality, space, quality of materials, technology, interior design and other facilities. Rishi Tulachan, managing director of Soaltee City, disagrees with this viewpoint, saying that though they are offering apartments at lower prices, there is no compromise in quality. As they are targeting the middle-class customer, the price range is fixed accordingly to suit their budget.

Lately, a number of housing companies have proposed open ended price lines to lure more customers. Mount View Residency charges Rs 7.9 million for a stand alone house having two bedrooms built on 3.5 aanas, while a five-bedroom bungalow built on 5.5 aanas costs Rs 20 million. Similarly, as per a scheme, the prices of Soaltee City apartments begin from Rs 19.99 million for single bedroom apartments and go up to Rs 29.99 million for two-bedroom ones and Rs 55 million to Rs 75 million for three-bedroom ones.

Likewise, Guna Colony is offering customers who make a lump sum deposit of Rs 2.4 million a chance of owning the flat after three years and they even get a rebate of Rs 700,000.“Because of the high interest rate on loans and prevalent liquidity crisis, we are offering different economical packages,“ says Rajendra Shakya, executive chairman of Guna Colony Pvt Ltd. The prices of other housing projects are also very competitive, with Harmony Housing setting its price from Rs 4.8 million onwards, while Shristi Colony offers individual houses for Rs 6.8 million. They claim that the price of land alone is worth Rs 4 million.

Though the price of land has dropped by around 25 per cent, developers believe that this is not instrumental in the decrease in the price of housing projects, since the construction cost determines the increase and decrease of prices. For instance, only 10 to 15 per cent of land price has a role in the price of the housing project, whereas around 70 to 80 per cent of the price fluctuation depends on changes in prices of construction material.

As developers compete to stay in the market, they are increasingly dissatisfied with different rules and regulations imposed by NRB. Recently, Supreme Court scrapped the decision of having to conduct housing transactions through the bank, which has made it easier for buyers to invest in housing projects. “NRB must come up with lasting vision for sustainable upkeep of the real estate and housing sector. It is modifying regulations time and again, which make it difficult for buyers and sellers to understand and deal with the market,“ adds Bajracharya. According to him, customers as well as developers suffer due to this regular modification and it takes at least six months to observe the effect of the latest rule. Besides developers, recession in housing and real sector has also hit the government revenue collection.
Though prices have fallen, developers say that buyers are still hesitant to purchase property, since the market is in a volatile state and they expect prices to fall further.

source: Pathak, Prakiti (2011),"Is it time to buy ?", The Himalayan Times, 21 May 2011