Revenue from property transactions hits record
- The government collected Rs 7.81 billion in 2013-14—up 50 percent
Aug 1, 2014-
The government’s revenue from property transactions surged more than 50pc to hit record high of Rs 7.81 billion in 2013-14. Land Revenue Offices (LROs) had collected Rs 5.2 billion in fiscal year 2012-13.
The previous one-year collection record was Rs 6.3 billion in fiscal 2008-09, since when the real estate market got into a downward spiral after the Nepal Rastra Bank (NRB) capped banks and financial institutions’(BFIs) realty lending to prevent a bubble burst.
As a result, the sector witnessed a long recession with the government’s revenue collection from land registration diving to Rs 4.18 billion in fiscal year 2010-11 and Rs 4.79 billion in 2011-12.
“The revenue collection last year remained outstanding,”said Raju Basnet, officer at the planning division of the Department of Land Reforms and Management (DoLRM).
“After witnessing a recession, the sector has shown a strong come back. The growth figure in itself replicates the status of the real estate sector.”
The real estate bounce back has surprised many. Considering the dismal performance of the sector for the past few years, even the government had set a revenue target of just Rs 4.5 billion in 2013-14.
“Transactions of real estate property have been good since the beginning of the previous fiscal year. The target set by the government was exceeded within just eight months,” Basnet said, adding all the districts witnessed a positive growth.
According to him, places like Kathmandu, Jhapa, Morang, Sunsari and Biratnagar have performed very well.
According to DoLRM, the Kathmandu valley contributes around 35 percent to the overall land revenue collection. Enthused by the collection figure, the government has sent a preliminary target of Rs 5.56 billion for the current fiscal year, according to Basnet.
The real estate sector has come along a long way in the past seven years. From a gigantic growth to a terrible slowdown, the sector has witnessed all. And now, real estate entrepreneurs believe the turning point for the sector has come. They believe the business is likely to get better soon.
Min Man Shrestha, general secretary of Nepal Land and Housing Developers’Association (NLHDA), attributed the growth to increased confidence of people. “Not only has the real estate, share market too has witnessed a massive growth. People’s confidence has bounced back and they are making purchases now,”said Shrestha, adding the economic indicators have remained positive since the second CA Election and the formation of the government.
He said those who were reluctant to buy property are finally making purchases. The other reason behind the huge surge in land transactions is the surplus
liquidity in banks. “Banks are financing genuine and reliable buyers,”said Shrestha. “And this too has helped a lot.”
NRB statistics show banks are financing property buyers, but are still hesitant to issue loans to property developers. As of mid-May 2014, BFIs’home loans (up to Rs 10 million) increased to Rs 83 billion from Rs 62 billion in mid-May 2013. However, lending to other real estate sectors decreased to Rs 82.72 billion from Rs 87.47 billion.
According to realty traders, the other major reason behind the surge in the revenue collection is the transaction of property in terms of fair market value.
Earlier, people used to devaluate property to avoid registration fees. But as government authorities have started to seek income source, and gains made by paying less in fees are also being questioned.
“Stringent anti-money laundering provisions have also forced people to do transactions at fair market price,”said Shrestha.
Published: 02-08-2014 10:44