Print Edition - 2014-06-09 | MONEY
Revenue from property transactions up 39.8pc
Jun 8, 2014-
In an indication that the real estate sector is bouncing back from a five-year recession, land transactions have increased significantly across the country. Land Revenue Offices in major cities, including the Kathmandu valley, have witnessed impressive growth in revenue collection from land and house registrations in the first 10 months of the current fiscal year.
The overall revenue collection from property transactions surged 39.8 percent over the review period, according to the Department of Land Reforms and Management (DoLRM).
In the first 10 months of the fiscal year, the government collected Rs 5.83 billion, while the figure was at Rs 4.17 billion in the same period a year ago.
Such is the growth in the collections that the target for the fiscal year has been already achieved, that too by a big margin. The government had aimed at collecting Rs 4.5 billion this year.
“The government had set the target based on the dismal performance of the real estate sector for the past few years. This year, the growth is huge,” said Raju Basnet, section officer at the planning division of the DoLRM.
He said land the revenue is expected to reach around Rs 6.25 billion at the end of this fiscal year.
“Since the data for two more months are yet to come, we are expecting the figure to easily exceed the Rs 6-billion mark,” he said, adding almost all big cities are witnessing a surge in land transactions.
The revenue collection from property transactions started to decline after 2009-10 after the Nepal Rastra Bank (NRB) capped real estate lending by banks and financial institutions (BFIs). The NRB move averted an imminent bubble burst in the property market, but pushed the sector to a recession.
Following the NRB intervention, the revenue collection from real-estate transactions slowed massively, with the collections coming down to just Rs 4.18 billion in fiscal year 2010-11, against the target of Rs 6.3 billion. As a result the DoLRM had to revise down its revenue target for 2011-12 to just Rs 4.5 billion.
The Kathmandu valley accounted for 42.88 percent (Rs 2.5 billion) of the total revenue collected across the country in the 10-month period. The valley has five Land Revenue Offices, at Dillibazaar, Chabahil and Kalanki in Kathmandu, and one each in Bhaktapur and Lalitpur.
Government officials say the major reason behind the increase in sales of land is the stability in price for the last three years, which has boosted the confidence of buyers.
“Land sales have been impressive lately,” said Min Man Shrestha, general secretary of Nepal Land and Housing Developers’ Association (NLHDA). He said sales of small land plots, priced between Rs 1.5 million and Rs 3 million have been good in the valley. People
are buying land in places around and outside the Ring Road that witnessing rapid urbanisation.
“As for the sales big land plots, the momentum is still not there,” said Shrestha, blaming BFIs’ reluctance to sanction loans to the real-estate sector for the situation. “Only around 10-15 credible project developers are issued loans, but they are the only ones who want to purchase big land plots.”
BFIs are still not ready to finance land purchase, but are issuing home loans. The NRB data show BFIs’ real estate loans have decreased, while home loans have surged. Home loans surged to Rs 77 billion in February 2014, from Rs 58 billion in February 2013. But real estate loans decreased by Rs 7 billion to Rs 82.8 billion over the period.
Published: 09-06-2014 09:01