With the timely allocation of the budget for 2013-14, real estate developers are optimistic about the new fiscal year ushering in growth for the sector, which has been stagnant since the last four years. Stakeholders state that after hitting rock bottom, the realty sector is poised to slowly but surely witness improvement this year.

Minman Shrestha, general secretary of Nepal Land and Housing Developers Association (NLHDA), says, “The chain cycle of any industry is around five years and it’s been four years since the real estate has been facing the current stagnant situation. Hence, technically too, it’s time for gradual improvement with the new cycle.” Stating that they have already observed marked improvement since the last three months, Shrestha says both transactions and demand are expected to gain further momentum this fiscal year.

The announcement of the full budget on schedule has added to the delight of real estate developers.Ichchha Bahadur Wagle, vice president of NLHDA, says, “Introduction of the budget on time with the initiation of the fiscal year is a positive sign as it will bring mobility in development activities and control liquidity.“ Moreover, stability of property prices, hints about political stability, filtration of real estate developers are other positive symptoms for growth. Wagle claims, “If the political situation in the country stabilises, transactions could grow as much as three folds.“

Wagle believes that price of properties will not go down further, and asserts, “Earlier, many buyers were holding on to their properties expecting the dip in price to be corrected. But now with the property price expected to remain constant and a 70 per cent correction already, we expect genuine buyers and end users to commence transactions again.“ According to Shrestha, there are altogether 4,000 unsold apartment units, which are holding up the investment of Rs 100 billion in total. To save the sector and rectify the deadlock, he says, “The government should introduce attractive schemes for government officials, bureaucrats, army and police officials to buy apartments. A home is the basic need of every citizen and to assure this right, the government should introduce plans for first time home buyers at subsidised rate and by deducting the tax on interest rates.

This alone can boost the sector.” Meanwhile, Shrestha opines Nepal Rastra Bank (NRB) should give a helping hand by providing loans to ongoing projects. “Banks and financial institutions (BFIs) are not exposed to more than 15 per cent in real estate, while NRB allows exposure up to 25 per cent.

The gap should be filled and BFIs have to be encouraged to invest in property in order to release the deadlock of investment which will directly impact 247 industries reliant upon the real estate industry,“ he articulates. To regain confidence in the market, Wagle says that there should be an environment for investment.

“Presently, the public have little or no faith in the cooperatives. Hence, this is a prime time for the government to create a favourable environment and formulate investment-friendly policies to attract investors in realty,“ he opines. While the scope for development of housing and apartments in the country is unlimited, he says developers should also consider areas outside the valley for their projects. Reportedly, urban areas such as Mahendranagar, Pokhara, Hetauda, Kalaiya, Itahari, Bardibash, Kohalpur, Dhangadi, Chitwan, Simara, among others offer wider scope for infrastructure development. He also assumes that the sector will see growth in transactions and demand from mid-August.

Bijay Rajbhandary, chairman of CE Groups, says that they are witnessing 15 to 20 per cent market growth in the sector. Being optimistic about the new fiscal year, Rajbhandary informs that CE Construction is launching a minimum of three to five projects in the valley around the periphery of the ring road targeting the middle-class strata. Stating that the situation facing apartments needs to be corrected, he says, “The ultimate solution to market the apartment projects is to rent out the space after the project has been completed. We have been renting out apartments in some of our projects and have found it to be a lucrative way of attracting potential buyers.“ To strengthen the market and gain consumer confidence, Rajbhandary suggests developers play fair, meet commitments and manage cash flow properly.

source: the himalayan times,20 July 2013