23/07/2013
Real estate won't improve until 2015
Report
Land and housing prices, which are on a
downtrend for the past four years, will not
improve for at least another two years, a
government study shows.
The study, which was commissioned by the
privatization unit under the Ministry of Finance
to prepare Business Confidence Index, has
revealed that realty market will not improve at
least until 2015.
Though the team led by Basudev Sharma, under
secretary at the unit, found some improvements
in business confidence of realty entrepreneurs,
the confidence level of real estate and housing
sector has remained at the lower end.The study,
the first of its kind in Nepal, was based on the
universally accepted OECD model.
“The study, which was carried out to measure
business confidence level of entrepreneurs,
found that confidence of realty entrepreneurs is
at the lowest level,” Sharma told Republica.
“Most of the realty entrepreneurs we talked to
told us that they don´t expect land and housing
prices to improve until 2015.”
According to Sharma, less than two percent of
the respondents said they expect land and
housing prices will increase in the coming days.
“Likewise, only a few of them said they expect
the prices to go further down,” Sharma said,
adding that majority of the respondents was
hopeful that prices will improve after 2015.
The team talked to people involved in varied
sectors like hotels, financial institutions,
wholesalers, retailers, realty entrepreneurs, and
infrastructure developers, among others. It
found lowest level of confidence among realty
entrepreneurs, according to Sharma.
“Some realty entrepreneurs think the existing
downtrend will continue for at least two to three
years,” said Sharma.
The study has found that entrepreneurs
involved in infrastructure, pharmaceutical,
hospitals and agriculture sectors have high
confidence level. In course of the study, the
researchers had asked five questions to more
than 300 business firms.
Land and housing prices increased exponentially
in the past as people put their money on land
and houses due to commercial reasons. About
four years ago, people used to purchase land
plots and houses not for residential purposes
but to make fast bucks. Though land and
housing transactions, they could make profit of
10-15 percent in just a month.
Global realty market slumped to recession in
2007 and its impacts were seen in Nepal after
about two years.
Sharma blamed that Nepal Rastra Bank (NRB)
did nothing to shield the country´s economy
from global economic meltdown. “When global
realty market slumped to recession, land and
housing prices in Nepal were increasing,” he
said. “NRB swung into action only after banks
and financial institutions started facing liquidity
crunch due to over exposure to the realty
sector.”
Sharma further said this type of slowdown
generally persists for five years. “It is likely to
improve after 2015,” he added.
He also said the study shows that land and
housing prices have come down by 20-40
percent after downtrend in realty sector began
in 2009.
Despite drop in prices, Sharma said realty
transactions have dropped by up to 80 percent.
He, however, expects transactions to improve by
around 20 percent in the next fiscal year.
Land and housing prices had started declining
after NRB instructed banks and financial
institutions to put a cap on lending to the realty
sector in 2009 to cool the heated realty market.
source: republica,7 July 2013
