Apartment sales bouncing back as getting loans gets easier

- SANJEEV GIRI, Kathmandu

May 3, 2014-

After a five-year slowdown, apartment projects in the Capital seem to have been regaining momentum, thanks to easy availability home loans.

Out of 9,000 apartment units built so far, around 5,500 units have already been sold, according to Nepal Land and Housing Developers’ Association. However, no new project has been started in the last two-three years.

“There has been a slow and steady growth in apartment sales,” said Min Man Shrestha, general secretary of NLHDA. “Around 1,000 apartment units were sold in the last year, which is a good indication.” Shrestha said only apartments priced above Rs 10 million are not selling. “There are just 1 percent apartments that are priced above Rs 10 million,” said Shrestha.

According to Shrestha, various factors including relatively increased confidence of buyers, easy availability of home loans and availability of property at relatively moderate prices played a crucial role in boosting the sales.

Banks are offering home loans at 8-9 percent on an average. Developers say the interest rate for them too has come down to around 10-14 percent on an average from above 15 percent.

Although banks are reluctant to make investment in the real-estate sector following the recession, a continued liquidity surplus situation forced them to adopt flexibility in home loans and loans for real estate projects, according to developers. Bankers say loans to individuals to purchase apartments as well as build their own homes have surged of latte. “We are providing loans to people having fixed income and who are capable of paying monthly installments,” said Upendra Poudel, vice-president of Nepal Bankers’ Association.

Poudel, however, said banks were hardly offering loans to developers as a majority of developers seeking loans are those who are facing trouble. He also said apartment sales have not picked up substantially. Nepal Rastra Bank (NRB) statistics also show home loans have surged in the recent times. In one-year period until mid-February, home loans (up to Rs 10 million) surged by Rs 19 billion to Rs 77 billion. On the other hand, real estate loans have continued to decline. Over the review period, realty loans came down by Rs 7 billion to Rs 82.8 billion.

Developers say although it is difficult to get loans for new projects, sales have remained good at projects already completed. Bijay Rajbhandary, chairman and managing director at CE Constructions, said inquiries were converting into sales encouragingly at their project in Dhapashi, Kathmandu. “We have already sold 70 percent of our 300 apartment units.”

Bhesh Raj Lohani, secretary of NLHDA, said the overall real-estate sector has seen some growth over the past few years and its impact is visible on apartment projects. “There has not been a significant growth in apartment sales, but if you analyze the situation a few years ago, there has been some improvement,” said Lohani.

Developers say apartments priced at Rs 5,000-7,000 per sq ft are selling decently. They say apart from apartment sales, the trend of renting out flats after buying too is also on the rise. Several facilities, including electricity, drinking water and security, have attracted people towards apartments. “People who are paying up to Rs 20,000 a month for a general house are happily shifting to apartments and are ready to pay around Rs 30,000,” said Shrestha.

This has also been one of the reasons why apartment sales have risen lately, according to developers. Lohani said although returns on rental investment are not that good, the trend has definitely helped projects regain momentum. He said as most of the buyers live in foreign countries, they tend to rent out their property.

“Many people see empty flats even after the building is fully constructed and make a perception that the properly is not selling,” said Rajbhandary, adding the trend of renting out apartment has helped change this perception and helped attract buyers.

Although no any new apartment projects have been registered at government authorities for the last two years, developers are hopeful the projects will bounce back sooner than later. An increasing need for office executives to reside in core city areas and high price or unavailability of land space will prompt people shift towards apartments, developers say.

“If you aim to buy a land plot inside Ring Road, at least Rs 5 million needs to be allocated for land itself. In the same price range, builders are offering furnished home,” said Shrestha, adding the government needs to promote apartment projects to encourage organised living.

Rajbhandary said the acceptance of apartments would increase with the time and there are no alternatives to apartments in a longer run.

Developers also said lengthy government procedures have prevented them from making fresh investment in the sector.

Published: 04-05-2014 11:14

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