Real estate business making steady recovery

- POST REPORT, Kathmandu
Real estate business making steady recovery

Oct 5, 2014-

The real estate business is likely to continue its upward trend in the current fiscal year. In the first two months of the current fiscal year, the government’s revenue from property transactions surged by 62 percent compared to the same period last year. According to the data maintained by the Department of Land Reforms and Management (DoLRM), the Land Revenue Officers (LROs) have collected revenue amounting to Rs 1.67 billion as of mid-September, 2014. The revenue collections for the same period of the previous fiscal year amounted to Rs 1.03 billion.

According to Tulsi Ram Vaidya, official at the DoLRM, property transactions in the major cities across the country has improved “significantly”. “The revenue collections from Kathmandu Valley has jumped noteworthily. Likewise, major cities across the country as well as places developing as cities too have posted a healthy growth,” said Vaidya. As per the DoLRM, Kathmandu Valley alone contributes to more than 35 percent of overall land revenue collections of the country.

Staffers at the DoLRM say that the real-estate market has reverted back to corrective mode after having gone through a spell of recession in the past few years. The fact that the LROs across the country had collected revenue amounting to Rs 7.81 billion in the fiscal year 2013-14, the highest revenue collection so far, also makes it pretty obvious that the real-estate market has reverted back to normal. The previous record was noted in the fiscal year 2008-09 with a collection of Rs 6.3 billion in revenue from property transactions. However, immediately after that the real estate market fell into a downward spiral following intervention from the Nepal Rastra Bank (NRB). The central bank had capped banks and financial institutions (BFIs) from realty lending to avoid a housing bubble.

The intervention of the central bank led to a big set back for the property developers with the revenue collection from property transaction dropping to just Rs 4.18 billion in the fiscal year 2010-11 and Rs 4.79 billion in 2011-12.

DoLRM officials say that the government is likely to achieve revenue collection target this fiscal year too. The government has set preliminary target of Rs 5.56 billion as revenue from the realty sector this year. But looking at the current trend, the target will be easily achieved, according to Vaidya. The fact that property transactions, especially the sale and purchase of land, swells up across the country post Dashain too showcases the wider scope of the property market. The first two months of the fiscal year falls during the monsoon season, when land is occupied by crops and farmers are reluctant to sell it. Post Dashain, with farmers finished with the harvest, the fields get cleared to be sold.

Bijay Raj Bhandari, chairman and managing director of CE Construction, one of the leading players in the country’s realty sector said that the current trend is positive. But according to him, there are still many areas that need to show improvement to prove that the real estate sector has bounced back holistically.

“The revenue has gone up mainly because of the growing land transactions,” said Rajbhandari. “However, transaction of houses and apartments constructed by developers is yet to improve in the same manner.”

Property developers say that the market has reverted back to normal path due to easy access to loans from banks and financial institutions. “Banks have lowered the interest rates and eased access to loans,” informed Rajbhandari.

Published: 06-10-2014 09:58

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