Stagnant real estate and political instability killing many construction related businesses ith the construction industry crumbling under challenges and realty at a standstill, even individuals are not investing in houses.

Individual house developers, engineering and architectural consultancy firms and construction material suppliers are all facing a downward spiral. Compared to last year, this year has been worse for these professional firms.

Dev Bahadur Maharjan, individual house contractor of Kirtipur, says, “The construction of houses in the valley is down by 50 per cent as compared to the previous year. We usually had around eight houses to build and work on within a year but the number is down to three to four. We are having a very tough time this year.” Maharjan blames the situation on the stagnant real estate business, banking cap on realty loans, construction material prices soaring and investment stuck on fixed property.

According to him, there are two types of building contracts — engineering designed and structurally sound engineered houses. He has faced problems as there have been delays in payments and problems in fund flow, which has resulted in delays in work completion. Informing that December is the time to obtain new contracts, he says, “We haven’t got any new contracts this year. Many of my friends are struggling for survival.” He says he is surviving because he is engaged with The Comfort Housing Pvt Ltd and working on a few projects.

Agreeing with Maharjan, Rajan Dulal, manager of Shine Roda Udhyog, a construction material supply firm says, “Inthe previous year, we supplied 50 per cent construction materials to individual construction and housing companies. However, this year there is hardly any demand for individual construction. The demand has dipped to five per cent of last year’s demand.” According to him, the slow pace in the economy and sluggish construction industry is the main reason for the lack of demand.

According to Maharjan, low demand for steel rods and cement has forced suppliers to even reduce prices by Rs five to Rs seven compared to some months back.

Engineering and architecture firms have the same story to tell. Architect Rajesh Shrestha of Vastukala Paramarsha, says, “Some developer issues and the chaotic situation of politics are the main reason that buyers lack confidence to invest in property and construction. Hence, we have less work.” He says, “There was some hope last year that the situation would be better but this year there is no single ray of hope and in the present situation it is hard to get even 25 per cent of last
year’s total business deals.” Informing that overall construction volume has declined because of a slow economy, he warns that if the situation persists in the real estate sector, it could pose a very real threat to the entire economy.

Shrestha further states that low income and spending capacity, cash diversion in the informal market and high interest on capital loans are other problems that prevent investment in property.

“Even when real estate developers are offering projects at breakeven cost, customers are not finding them lucrative enough,” he says.
Mahendra Bahadur Chitrakar, president of Federation of Nepal Brick Industries, says, “With the problems in the real estate sector we face a direct impact. Our business is on the verge of collapse as we have only contracts for 15 to 20 per cent of last year’s volume.” He further adds, “This is the peak season when we start new brick production and clear the old stock. However, we still have 20 to 30 per cent stock left and so are not producing anything new.” According to him, brick industries are running in losses due to lack of demand.

source: The Himalayan Times,22 Dec 2012