"The umbrella organisation of real estate developers have submitted a nine-point list of suggestions to the central bank to resolve their major concerns"

As the budget announcement for the upcoming fiscal year 2014-15 is approaching, the real estate sector has heated up with demands to adjust major concerns that have been hindering the sector from growing. Nepal Land and Housing Developers Association (NLHDA) has submitted a nine-point list of suggestions to Nepal Rastra Bank (NRB) to resolve the concerns of the sector. Since the realty sector has been gradually experiencing positive vibes after few years of stagnancy, real estate players are optimistic about this budget and monetary policy.

The central bank generally introduces monetary policy a few weeks after the budget announcement. However, real estate developers are in wait and watch mode until budget is actually announced. Citing that realtors are having financial problems to complete some 55 ongoing projects, the umbrella organisation of real estate developers has urged the government to freeze the interest on their project loans for a period of one year. Similarly, they have asked to provide fair market value of houses and land collateral, reduction of interest rates and home loans, reasonable interest for first time homebuyers and discount of income tax on EMI amount of such buyers.

In addition, they have urged to extend the ceiling of real estate loans from Rs 10 million to Rs 20 million and for personal overdraft to be exetended by three years.

“The government should focus on improving the situation of the realty sector as it is interrelated with other sectors including construction and the overall national economy,” said Minman Shrestha, General Secretary of NLHDA. He stressed that there is the need to implement the pending provisions that foreigners can own apartments so that the sector could progress well,” said Shrestha.

Citing that monetary policy determines exposure to banks and financial institutions, Ichchha Bahadur Wagle, Vice President of NLHDA said, “The current home loans ceiling of up to Rs 10 million is not enough for home buyers and has to be revised.” Citing that although commercial banks are lowering interest rates on home loans, he said, “We are demanding the central bank maintain interest rate in single digit for increas- ing development activities through housing projects.”

NRB directives limited the exposure of banks and financial institutions (BFIs) in real estate to 25 per cent. Stating that BFIs are only investing 10 to 15 per cent in real estate sector, he said, “There is a misconception that the real estate sector is risky . Hence, NRB should guide them to invest in the sector and create a conducive environment for the sector.” He further stated that despite demand, new projects are not coming up due to the lack of resources.

Wagle is of the opinion that the scope for real estate is increasing. “There is a need to introduce policy to decentralise the establishment of planned urbanisation outside Kathmandu valley,” he said. With the declaration of 70 sub-municipalities across the country, there is greater scope for affordable housing and land plotting in the market.

He urged the government to create an environment for developers investing outside the valley such as Jhapa, Birtamode, Lahan, Nepalgunj, Simara, Nawalparasi, among others.

source: the himalyan times,14 june 2014