In what could be an indication of improvement in the real estate sector, the government’s revenue collection from land/property registrations in the Kathmandu valley surged 80.5 percent in the first quarter of this fiscal year.

The collection in five Land Revenue Offices of the valley stood at Rs 622.86 million in three months ending mid-October, according to the Department of Land Reforms and Management. The figure was at Rs 345 million in the same period last year.

Realty traders also acknowledge the sector is improving lately. The Nepal Land and Housing Developers’ Association General Secretary Min Man Shrestha said improved revenue collection from land/property registration was one of the indicators of improvement. “Although the revenue collection figure does not represent the actual selling/buying of property as the government also collects revenue from mortgages, real transactions, even so, have grown by around 20 percent,” he said.

Developers said they have managed to pull relatively greater number of buyers over the last three months. Festive schemes offered by housing developers and the soft approach adopted by banks and financial institutions (BFIs) on home loans have lured buyers, according to them.

Flush with excess liquidity, BFIs are offering home loans at cheaper interest rates. Older banks have already reduced interest rates on such loans to around 10 percent, while other banks are also reducing their rates. Some banks are even lending for land development, provided houses are constructed there.

Laxmi Bank recently introduced a 25-year home loan plan, under which new home owners/buyers can repay their loans over 300 equal monthly installments. The bank charges 10 percent interest on the loan.

NIC Bank has launched ‘Pre-approved Home Loan’, under which the bank decide the loan amount and interest rate for customers based on their income.

After the Nepal Rastra Bank removed home loans up to Rs 10 million from the category of real estate loans, most of the banks are offering home loans up to that amount. Banks have long been providing home loans as safer investment option as they are given particularly to fixed income earners.

Kist Bank CEO Kamal Gyawali said the central bank’s relaxation has come as a relief for banks at a time when there are not many investment options. “After the central bank increased the limit of home loans that are not categorised under realty loans, banks have increased investment in the sector,” said Gyawali.

He, however, said banks’ pressure on realty traders to repay loans might have forced them to sell their collaterals, resulting in increased land/property transactions.

Realty traders also said BFIs were still sceptic about providing loans above Rs 10 million. “Bigger projects are not getting funding from banks,” said Shrestha.

source: The Kathmandu Post,4 Nov 2012