Realty sector sees signs of revival

After a lengthy slump, the real estate sector has seen signs of revival with banks and realty traders offering attractive packages to sell apartments.

Of late, the liquidity situation in the banking sector has improved and they are daring to invest in the real estate sector, specially housing, again.

On the other hand, realty traders are also looking at an opportunity after the government increased the income source disclosure requirement to Rs 10 million for purchase of land and houses.

As the environment is becoming favourable for both banks and real estate traders, about half-a-dozen housing entrepreneurs have opened bookings for apartments and houses with special discount packages before the Dashain and Tihar festivals.

According to realty traders, 6,000 apartments and 1,800 houses have been opened for booking. “These include buildings and apartments whose construction has already been completed and those still under construction,” said Min Man Shrestha, the general secretary of Nepal Land and Housing Developers’ Association (NLHDA).

“The market confidence seems to have strengthened,” he said. “The construction of all the apartments and houses will be completed and handed over winthin the next five years.”

Traders who saw a lengthy stagnation in the business are ready to sell apartments and houses even by reducing their projected profit margin. “The main problem has been the complete stalemate in the trading,” said Bhesh Raj Lohani, the secretary of NLHDA. “Now, there is a ray of hope appearing.”

Everest Bank has introduced a special scheme for those willing to buy apartments and houses. “We have received very good response to the scheme from throughout the country,” said a source at the bank. “Customers are attracted to the scheme as we have promised not to hike the interest rate for a year and provide loan for furnishing and maintenance as well.”

Apart from Everest Bank; a few other big banks have also made house loans easier. Traders are also jubilant with schemes being introduced by the banks. “The interest rate has come down to 13 percent from as high as 17 percent for the realty sector,” said Lohani.

According to real estate traders, the central bank’s latest provision to increase the cap of home loan to Rs 8 million eased the transaction to some extent. “Similarly, the Cabinet’s endorsement this week of the budgetary provision that one should not disclose the income source to buy land and house worth Rs 10 million also gave us a huge relief,” said Shrestha.

After banks reduced their realty sector exposure below the level fixed by the government, their lending in the sector has eased of late. They were required to reduce the exposure of loans to 25 percent as of last fiscal year. “We have seen positive developments in the housing sector,” said NRB spokesperson, Bhaskar Mani Gyawali. “However, we have sought to control lending in land plotting, which is an unproductive sector.”

Entrepreneurs say banks are not only offering home loans, but also providing loans to develop housing projects. “They are lending as per the quality of the projects,” said Shrestha.

Despite the high demand, developers say they have the capacity to hand over only 1,600 house/apartments per year. “Latest statistics show that there is a need of 900,000 more houses,” said Shrestha. “There is space for coordination between real estate entrepreneurs and the government to meet the requirements and promote an organised settlement.”

Developers are also optimistic that the easing of the liquidity situation will stimulate the sales of houses and apartments. “September/October is considered the beginning of the season for housing business,” said Shrestha. “We expect a good fortune this year.”