Bhesh Raj Lohani is the secretary of Nepal Land and Housing Developers Association (NLHDA).  His housing project Green Hill City has opened the booking for the 229 houses now.  Kathmandu Post caught up with him to talk about the current situation of real estate industry and its future. Excerpts:

Real estate industry has been witnessing a slump for the last few years. How is the latest situation?
Real estate sector as a whole is still going through a recession. However, the impact is less in standalone homes compared to apartment projects and land development. If we count the projects already constructed, those under construction and those which have received approval from the government, there are around 10,000 projects in Kathmandu valley. Of the total, only around 50 percent have been sold. However, the situation seems improving gradually.

Has there been a change in price of real estate properties over the period?
Firstly, price of real estate properties has remained constant since past three years.  Developer who used to sell a property worth Rs 10 million around three years ago are dealing in the same rate at present eventhough the price of construction materials surged by 25 percent over the period. Therefore, the price of real estate property has been corrected by around 50-60 percent.

You said that the situation is improving. What helped in improvement in situation?
The strengthening of dollar has led to rise in remittance, which in turn to some extent has helped revive real estate business, with people starting to purchase properties. On the other hand, banks and financial institutions have brought down interest rate. That’s why there is hope that people will start investing on real estate properties and those who had held their desire to buy real estate property too will start purchasing.        

Lately some of the big developers have been blacklisted. What are the major reasons behind this?
Some of the developers came up with projects beyond their capability. Likewise, some of the developers collected money from the customers through bookings and diverted it to other sector or business. Our association (NLHDA), the government and the banking sector failed to control the arbitrary price hike. And the enforcement of stern regulation by the Central bank caused problem to even those developers doing genuine business. As many projects have been affected, its effect in the market is yet to be seen at bigger scale. So the developers and BFIs should now work together in getting the stalled projects completed to safeguard the investment.

Likewise, only 15-20 percent customers who had purchased the projects were end users. If the end users had purchased it there wouldn’t be such big problem.

Despite the sector going through tough times why have developers not focused on affordable projects?  
While doing business, a businessman always looks for a high profit margin. Till date, the projects conceived has been primarily targeted at people from the upper middle class and the margin were quite high. But the scenario will change gradually. There is a need for projects, with less margin, that suit the middle class and lower middle class people. Now, developers should think about projects that a person with income of around Rs 40,000-Rs 50,000 monthly can afford. But they developers need support from the government to do so. The government should help private sector in land pulling which will control the price of land, enabling them to buy it in bulk quantity. That will have direct impact upon the price of the overall project.

What is your assessment about the real estate sector’s performance this fiscal?
If we segregate this industry, apartment and very expensive property are yet to face real problem. Likewise, those developers who are not being able to come up with the committed projects too will face problem in the days to come. But standalone properties and land costing around Rs 500,000- Rs 700,000 per aana will not see any effect now. There will be only growth in this segment. 

Tell us something about your current projects, including Green Hill City?
Located near Guheshwori, Kathmandu, Green Hill City is spread over an area of 312 ropanis of land. In the first phase, we have opened bookings for 229 houses being constructed in 102 ropanies of land. So far, 53 percent of the properties have been booked. Likewise, we will take bookings for 251 houses spread over an area of 125 ropanies of land in mid-November. These properties have been priced from Rs 5.4 million to Rs 12.7 million. Likewise, those interested to buy only land and build house can also do so provided they follow our design and complete the project within five years.

We are also operating a project named Rose Village in Balkot, Bhaktapur. It features 150 houses, of which 80 units have already been constructed and people have already started resinding there.

source: The Kathmandu Post,5 August 2012