What is your response on the new directives issued by Nepal Rastra Bank (NRB) regarding home loans?
Though NRB has decided to exclude personal home loans of up to Rs 6 million from real estate loans, it is just a piece of the whole pie. This directive does encourage the general public to buy houses, but it will make very little difference to developers.
What are the problems faced by the housing and real estate developers?
Real estate is currently at a standstill and it is impossible to overcome this situation until NRB relaxes the cap. The government has a policy, according to which banks can invest up to 40 per cent in any sector. But in real estate, NRB has limited this to only 25 per cent -which is unjust and irrational.
According to central bank data, approximately Rs 1.35 billion is invested in the real estate sector. If the liquidity crisis is not solved, all banks will be bankrupt and the real estate sector will collapse. The only solution to liquidity crisis is to lift the cap from real estate.
Do you mean NRB had no valid reason to put the ceiling? Is it not a major step to control the asset bubble?
NRB is, of course, entitled to be concerned about the situation. But it should not enforce the ceiling without any study. Instead, it should formulate proper guidelines to monitor the real estate sector. I would also like to mention that there were no artificial transactions, as many assumed. And there were no chances of the bubble being burst.
It was the demand of that time since there was no investment in productive sector due to the decade long conflict and Maoist agenda.
People believed that Maoists would nationalise free land once they entered the mainstream. But this did not happen. So, people were relieved and re-attracted towards this business. That is why the prices skyrocketed. Since inflation has affected every sector, it is no surprise that the prices of land have also been hiked. Similarly, Tarai unrest and unstable government were also responsible for the price hike.
All constructions are targeted only for upper and middle class strata. Isn't there a need for low-cost housing too?
We can provide low-cost housing only if the government grants subsidies to us. For instance , extra expenses such as tax, VAT and paid-up capital need to be deducted. Barren public land can be set up with infrastructure such as electricity, drinking water and sewage. The people who cannot afford land should be instructed to build their houses in such places so that they will not be burdened with land prices. The government should also undertake responsibility for such housing under its scheme to fulfill basic needs of all citizens. The solution would be the government developing guideline to give subsidies to rooms or areas allocated in constructions targeting people from lower economic strata.The mechanism and technology of low-cost housings also need to be monitored and regulated.
How beneficial is the idea of allowing foreigners to buy houses in Nepal?
I think it is a good idea. Though it is still in the conceptual stage, the draft has mentioned that only those above 50 years of age can buy houses here. Once they reside in Nepal, they will bring in foreign investment. It will also generate employment.
What are the challenges of this sector?
Firstly, the government lacks clear vision and policy regarding real estate and housing and its potential to boost the economy. Secondly, we the developers and entrepreneurs need to gain knowledge about planned growth, as unscrupulous agents are encouraging haphazard expansion.
What are your expectations from the government?
In the absence of concrete bylaws, this sector is operating on an ad hoc basis. To ensure smooth running, the government must recognise real estate as an industry and come up with an effective code of ethics. It should also take steps to pass the House and Land Transaction Act which has been under consideration in the parliament since three years.The development budget lapses every year due to unstable government and parties' differing ideologies, which is a major hinderance for development in the sector.
source: The Himalayan Times(2011),"We can provide low-cost housing only if the government grants subsidies: Ichhya Raj Tamang", The Himalayan Times,26 March 2011
