Singling out realty traders will only exacerbate problem
KATHMANDU, JAN 09 -
Housing developers, bankers and industrialists related to construction materials said that central bank and banks and financial institutions (BFIs) should be flexible to resolve problems in the realty sector.
They lamented the recession in the realty sector, which began three years ago, has hit everyone involved. While admitting their weakness has contributed to the present crisis in realty sector, the developers argued the central bank’s abrupt decision in 2009 to cap the realty lending was a major factor behind the trouble in the sector.
“The realty traders have made mistakes in the past but punishing them only will completely bring down the business,” said Ichchha Raj Tamang, president of Nepal Land and Housing Developers’ Association at a roundtable organised by the Post on the realty sector.
Central bank directives to extend loans upto only 60 percent of the fare market value of collateral as opposed to earlier 80 percent and longer administrative hassles for starting housing projects also contributed to woes of the realty sector, according to the realty traders.
They demanded that the authorities should allow the developers to complete the projects, encouraging them to start low cost housing latter to resolve the current problems in the sector. Besides suggestions to lower bank interest rate, one window system for fulfilling different regulatory requirements before starting the construction of the project, they also asked the government to ease legal provision for foreigners to purchase house and apartments in Nepal as well as a provision of concessional loans for government employees to purchase housing and apartment projects.
They also asked the authorities to help troubled housing developers to rescue their projects to create a win-win situation for all—developers, banks and customers who had booked the house and apartments. One of leading housing developers, Sudhir Basnet, is currently struggling to complete his housing projects.
The industrialists dealing in construction materials said that recession in housing sector has affected their business too. Managing Director of Panchakanya Group Pradeep Kumar Shrestha said the recession which hit the realty sector three years ago has also affected the business of the construction materials. Asking for some relief to the housing sector , Shrestha warned that piling any more pressure on realty traders would only lead to the disaster.
Another industrialist Bishnu Neupane said that they are facing delay in getting payment for the supply of cement to the developers.
“The recession in the realty sector has not created havoc on us but has affected our business by 10-15 percent,” Neupane said. He suggested a tripartite agreement among banks, builders and buyers of house and apartments to settle the ongoing problem in housing sector .
Bankers lamented lack of buyers was the main factor pegging back the recovery of the real estate sector. “There are several ways to rescue the troubled realty sector as long as demands for housing apartments are created,” said Rajan Singh Bhandari, president of the Nepal Bankers’ Association.
Regarding the housing developers’ complaint about the high interest rate, Bhandari said that it is a bilateral issue. He also said that despite positive attitude of bankers towards housing business, they are compelled to take stringent decision on loan recovery to fulfil the central bank’s directive.
On the other hand, Nepal Rastra Bank (NRB) spokesperson Bhaskarmani Gnawali said that the central bank was never treated the housing sector badly mentioning that home loans upto Rs 10 million has been exempted from the realty loan category. “The NRB has been introducing the regulation based on consultation with stakeholders,” Gnawali said.
On the central bank’s late move to impose ceiling on the realty lending, he said NRB’s intervention came only after the realty price shot up. He also stressed the need to make house and apartment prices affordable, “that alone will solve 75 percent of the current problem without any efforts.”
Lately, it emerged that there has been huge lending to the realty sector from cooperatives too. As the cooperative sector is poorly regulated, there is a high risk of defaults from the realty traders in the sector too.
Kedar Neupane, registrar at the Department of Cooperatives, conceded that the department’s failure to follow the central bank suit to fix ceiling on the realty lending. “As a result, the lending surged from the cooperatives and is now affecting the sector too,” he said.
Source: The Kathmandu Post
