Realtors cut prices up to 30%

Real estate dealers, who long resisted selling pressure for fear of a downward price spiral, have started to cut prices in a bid to lure buyers and recoup possible investment at the earliest.

On Tuesday, Uddav Raj Bhattarai, chairman of Kapan Housing, placed an advertisement in a national daily offering to sell land at a lowered rate of Rs 350,000 per ana (342.25 square feet).

Just a couple of months ago, he had sold numerous plots of the same land at half a million rupees. "Not only that, I have slashed the rate of a 800 square feet stand-alone groundfloor house to Rs 5.5 million from Rs 6.5 million,” he informed Republica.

Laxmi Neupane, chairman of Manakamana Housing, has a similar story. He recently reduced prices of residential plots at Hattigaunda which he had developed, to Rs 800,000 per ana from Rs 1 million. Till a month ago, he was adamant he need not review the prices even though transactions had nosedived.

In general, real estate dealers have slashed prices by as much as 30 percent in Kathmandu, said realty experts. “Unfortunately, most of them are failing to lure buyers even at the lowered rates,” said Neupane.

As the realty market wore a deserted look, Raj Kumar Maharjan of Indreni Real Estate told Republica he is facing trouble managing cash even to pay his office rent whereas his monthly income was running at a million last year.

People like Maharjan who deal in property on loans taken from family and relatives, said they have no option but to lower the prices to recoup investment and settle dues. Dealers like Neupane, who are into real estate with loans from banks, said on the other hand that they have reached a point whereby they can no longer resist the heat. “After holding the price for almost a year, the pressure is now unbearable," he said.

Experts like Buddhi Narayan Shrestha, who is also an advisor to the Nepal Land and Housing Developers? Association (NLHDA), said land prices have not dropped at prime locations and in cases where the developers invested personal money.

“Otherwise, prices have invariably dropped in ranges of 20 to 30 percent in the outskirts of Kathmandu, 15 -25 percent in Lalitpur and 10 to 25 percent in Bhaktapur,” he said.

Still, most dealers preferred to maintain silence about their price cuts and selling spree; they fear it might spark a downward trajectory, something which could hit their investments hard.

Nepal?s real estate business has been jittery since January 2010, particularly after the central bank imposed a cap on the loan exposure of banks and financial institutions (BFIs) to the sector. The move was aimed at cooling the overheated market.

While the imposition of a capital gains tax and income disclosure on property transactions above Rs 3 million discouraged commercial buyers, rise in the lending rate that jumped from 9 percent to 17 percent amid the liquidity crunch also drove away buyers.

As a result, the five land revenue offices (LROs) in the capital valley, which used to be heavily crowded with service seekers, wear a deserted look at present.

“Our average daily transactions now number around 80. Last year, it used to be well over 250 and managing the rush used to give us a tough time,” said Hari Prasad Gauchan, an officer at Chabahil LRO.

Transactions at Dillibazar have dropped to 50 a day from well over 200, while transactions at Kalanki too have dipped to an average of 30 from last year?s daily average of 200. The situation at Bhaktapur and Lalitpur LROs is no different.

Owing to the dip, the government?s revenue collection from realty transactions in the month from mid-September to mid-October dropped to Rs 90.08 million. It had collected Rs 317.20 million in the same month last year.

Although NRB in September 2010 relaxed its cap on housing loan exposure, it continued to tighten real estate loans, including loans issued for land plotting and procurement.

“As the directive seeks BFIs to limit their realty portfolio to 10 percent of total loans by 2011/12, most of them have stopped renewing loans in the sector,” said Sudhir Khatri, chief executive of DCBL Bank. Some financial institutions are even seeking parties to repay as early as possible.

This has upped the selling pressure and some 75 percent of real estate dealers, who trade with loans and informally borrowed money, are under severe stress, said Shrestha, adding that he foresees many of them jumping into the selling current soon.


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