Icchya Raj Tamang is the chairman of Civil Group, a business conglomerate that has been operating a slew of companies ranging from real estate and housing to banks and financial institutions. In an interview with Rupak D Sharma of Republica, Tamang talked about the group´s new project, Civil Trade Center, and the country´s stagnant real estate market. Excerpts:

As of Saturday you´ve been able to sell 67 of 151 units in Civil Trade Center. How do you take this response?
By putting the units in Civil Trade Center up for grabs, we have created investment opportunities for public. To ensure investors get good returns, we have also promised to take the responsibility of renting out the units that they have bought. This way the owner can pay the installment amount on loan acquired from banks. By doing this, we are not only transferring ownership in the trade center and creating investment opportunities to the public, but also trying to provide new lease of life to the real estate market which is under stress. And public response, towards this endeavor, has been good so far.

In January last year you said all the units in the complex were sold out. Now you have re-opened the bookings. This is creating confusion in the market.
At that time we had conducted a market survey to fix the price of units. In this process, we set a target of selling at least 10 units at a certain price. This would have given us assurance on demand for the units at Civil Trade Center. But soon after bookings were opened, we sold 25 units. We then issued a press statement saying that we had achieved 100 percent of our sales target. This created confusion as people assumed we had sold all our units.

How long can investors own these units?
Since Nepal´s law has guaranteed people´s right to own land, the units can be owned by investors for lifelong period.

Who will take the responsibility of reconstruction in case a disaster turns the complex into rubbles?
First of all, the building has been insured. Once the ownership is transferred, individuals, who have bought the units, will have to purchase insurance policies for individual units to cover them from various risks. In case of disaster, we will use this fund to reconstruct the building.

But insurance companies do not provide 100 percent coverage. Who will put in rest of the money?
In such case, individual owners have to make contributions based on their stake in the complex.You´ve also provided financing option of up to 60 percent. Have you signed an agreement with any bank or financial institution in this regard?

Civil Group owns a cooperative called Civil Cooperatives. We are using this institution to provide loans to our clients. We are offering these loans at a rate of 15 percent per annum.

What´s the cost of the project and what are its key attractions?
It is around Rs 2.65 billion, including cost of land and construction expenses. Some of the attractions of the complex are two theaters, a banquet hall that can house 1,500 people, conference hall that can seat 1,000 people, a rooftop garden restaurant, a revolving restaurant and a helipad.

Do you think these attractions are enough to lure more buyers as many are waiting for real estate prices to come down?
Since Dec 17, 2008, when the central bank put a cap on real estate lending, realty prices have neither gone up nor come down drastically. This means prices have remained at more or less the same level for the last three years. In the meantime, prices of other consumer goods have gone up sharply. In my opinion, price remaining at the same level for three years is also a form of correction, as correction should not necessarily imply reduction in prices. And I don´t think prices will fall further.

But the situation is still volatile. How can this mess be cleaned?
Banks and financial institutions should issue more credit to the realty sector so that incomplete projects are finished. But they should do this only after determining the credibility and pay-back capacity of borrowers.

Do you think such a measure will help at a time when real estate transaction has come to a halt? Besides, borrowers do not want to get fresh loans unless they get rid of land and houses they now own.
Currently there is a bubble in the real estate market. We need to create holes in it by pumping more money into it. This way, good investors can have resources to take over projects that are incomplete or have failed.

Considering present scenario, won´t this only raise the inventory in the real estate market?
Only around 200 apartment projects have not been able to find buyers as of now. This is because they are incomplete. If banks and financial institutions inject additional Rs 10-12 billion, all apartment projects will be complete. This is not a huge amount and I am sure there is demand for apartments in the market.

source:republica,12 feb 2012