The new monetary policy has housing and bank sectors hoping the flexible will encourage housing development as an industry and discourage those involved in skimming money by real estate speculation.

The monetary policy enables banks and financial institutions (BFIs) to invest in the housing sector up to 30 percent of total lending while it caps lending on land transactions at 10 percent. Those lending over 10 percent should reduce it to below 10 percent within two years.

Nepal Land and Housing Developers’ Association President Ichchha Raj Tamang said Nepal Rastra Bank (NRB) has given the housing sector greater borrowing space. “Even those involved in just land transactions will have plenty of chances of getting loans at a ceiling of 10 percent as there is just 5 percent lending in this sector,” he added.

There had been lending to the tune of Rs. 63 billion in the realty sector that had also covered lending in housing development as per the existing definition of real estate. There has been lending to the tune of Rs. 35 billion to the housing sector out of a total Rs. 476 billion lending by banks.

As result of tightening of screws on both the housing and realty sectors last December, land transactions declined by 26 percent in Kathmandu Valley and the number of those taking license for housing projects also decreased the last fiscal year.

Managing Director of Imperial Housing Bijaya Bahadur Manandhar said the housing market would see a boom if end users get loans easily. Bankers are happy about provisions on housing and real estate. Chief Executive Officer of DCBL Bank Sudhir Khatri said NRB’s move to give priority to housing development would help promote production of inputs like cement, iron and steel and others for construction.

source: Shrestha, P.M. (2010),"Developers hope realty sharks fade away",The Kathmandu Post, 28 July 2010,p.1