The housing sector, buoyed by recent central bank directives, is starting to gather momentum after a months-long slowdown. Leading housing developers have started rolling out new projects while others are planning to do so. In the last one week, four new apartment projects were launched in the capital with Soaltee City at Ravi Bhawan being the latest.

Nepal Rastra Bank’s (NRB) new directives on housing lending and festive season have prompted housing developers to roll out their new projects. The developers are investing billions in single projects.

On Friday, Platinum Developers launched its Soaltee City with over 500 plus apartments at Rabi Bhawan. Civil Group, one of the leading housing developers, has also joined the bandwagon by launching Civil Apartments at Dhapakhel, Lalitpur. My Residency, being developed by Shangri-La Housing, has already received over 60 percent bookings within a week.

The central bank’s new directive in the third week of September has given much needed boost to the domestic housing sector. The last fiscal year saw fewer housing and apartment projects being launched following a series of government steps. The liquidity crunch followed by the central bank’s directives to banks and financial institutions to cap real estate and housing loans also made developers wary.

There were 36 housing and apartment projects announced in the Kathmandu Valley in fiscal 2008/09 while there were 23 in fiscal 2009/10. Housing developers said bookings for apartments had been hit by the reluctance of banks to provide loans. NRB through the new directive had relaxed banks and financial institutions (BFIs) lending towards the housing sector. As per the new directive, BFIs will have to bring down their exposure to the housing sector to 25 percent within the next two years.

Housing developers say banks will loosen credit after the central bank’s directives making them easier to go for new projects. “With the central bank’s directives, we hope it would be easy to get loans from BFIs,” said Ichha Raj Tamang, president of the Nepal Land and Housing Developers Association, who had rolled out the Civil Apartment project.

The favourable policy regime is the major reason why developers are investing billions in housing projects. With the relaxed parameter by the central bank, especially in the housing sector, housing developers are also eyeing bigger projects targeting middle and lower class families migrating from various parts of the country. Platinum Developers is planning to launch the biggest apartment project having 1,000 plus units within six months in the Ring Road area.

“We will be targeting more middle class and lower class who do not have a house in the Valley,” said Ganesh Agrawal, chairman of Platinum Developers. He said that demand for apartments had gone up significantly as the price of land had increased heavily in recent years. The Civil Group has invested Rs. 650 million in Civil Apartment whose price starts from Rs. 3.5 million. Civil Trade Centre and Civil Luxury Apartments are also in the pipeline by the Civil Group. Platinum Developers is spending Rs. 2.5 billion on Soaltee City.

Will this surge last? Developers are hopeful. “There is good potential in apartment and independent housing too,” said Prakash Bajracharya, a director of Shangri-La Housing.

Housing developers say there is still huge demand for apartments, and they’ve not been able to meet that demand. This fact was illustrated when 21 units of Soaltee City were booked within two hours of launching on Friday. “It clearly shows the level of demand for apartments in the capital,” said Agrawal. “The NRB provision has also made it easy for customers to draw loans from banks.”

source: Shrestha, R. (2010),"On the home front", Money: The Kathmandu Post,8 October 2010, p.1