Depression in the business of realty in Kathmandu Valley continued in the first month of current fiscal year also. Revenue collection by five land revenue offices (LROs) of the valley illustrates realty transactions nosedived by a whopping 81 percent from mid-July to mid-August (Shrawan) compared to what transpired in the same period the last fiscal year.

The realty sector has been on a downturn ever since last year’s budget introduced a 10 percent capital gain tax on realty transactions. It was further hit by source disclosure policy of the government followed by the central bank’s directives on capping real estate and housing loans of banks and financial institutions (BFIs) last December.

Revenue collection of the valley’s LROs shows realty transaction have been declining at a faster pace after Nepal Rastra Bank introduced capping on realty and housing loans. The revenue from realty transactions failed to touch Rs 200 million in the last six months. Except between mid-June to mid-July (Ashad), realty transactions in Kathmandu Valley stayed at a constant decline.

Land revenue collection of the valley’s LROs dipped by a whopping 32.5 percent the last fiscal year. The LROs collected Rs 2.97 billion land revenue in 2009-10 compared to Rs 4.4 billion in 2008-09.

Officials at the Department of Land Reforms and Mangament say the decline in the realty transaction has hit revenue collection. “There is a serious decline in realty transaction,” said Govinda Prasad Sapkota, director at the department. “As in the case of housing loans, the central bank has had to ease criteria for real estate loans also.”

Prakash Bajracharya, a housing developer whose two projects are underway says banks’ reluctance to provide new loans following the central bank’s directive has affected the business. “With the new monetary policy stating that it will ease housing loans, we’re hopeful that business will pick up,” he said.

Other housing developers say they are waiting for the central bank’s directives on housing loans. The realty and housing developers were hoping that changes made by the new monetary policy of the NRB on realty and housing loans would give them some relief. “In view of the relatively higher value addition of the housing sector, the credit ceiling on the sector will be moderately eased while the credit ceiling on

land purchase and plotting will be continuously tightened,” reads the monetary policy.

Though the policy didn’t change the 40 percent exposure limit to the real estate cum housing sector, it fixed the credit ceiling for land purpose and sale at 10 percent of the total credit. With 10 percent ceiling fixed for the realty sector, housing developers believe BFIs’ 30 percent lending can come to the housing sector.

In the wake of NRB’s directives, even housing business witnessed a decline with fewer housing projects coming up. Over the last six months, half a dozen housing projects were launched.

Declining revenue
Land Revenue Collection by LROs of Kathmandu Valley

Mid-December to mid-January    Rs 375.5 million
Mid-January to mid-February    Rs 279.17 million
Mid-February to mid-March    Rs 196.45 million
Mid-March to mid-April    Rs 143.34 million
Mid-April to mid-May    Rs 106.1 million
Mid-May to mid-June    Rs 125.4 million
Mid-June to mid-July    Rs 180.4 million
Mid-July to mid-August    Rs 124.73 million

Downward trend
2009-10    Rs 2.97 billion
2008-09    Rs 4.4 billion

source:The kathmandu Post (2010),"Realty goes into recession",The kathmandu Post, 28 August 2010