KATHMANDU: In a significant turn of events, real estate transactions in Nepal have witnessed a notable upswing following the Nepal Rastra Bank’s (NRB) adoption of a more lenient policy and a concurrent decrease in interest rates on property loans provided by banks.
Data from the Department of Land Management and Archive (DoLMA) indicates a substantial increase in real estate transactions over the past month, with a total of 45,277 units of land plots and housing changing hands. This surge in transactions represents the highest figure recorded in the first five months of the current fiscal year.
Notably, the government has reaped considerable benefits from this trend, collecting revenue exceeding Rs 3.20 billion from property transactions between mid-December and mid-January.
The recent surge can be attributed to several factors. Banks, finding themselves with an excess of loanable funds, have slashed their base lending rates in recent months. The NRB’s decision to adopt a more accommodating policy for the real estate sector has also played a crucial role in revitalizing property transactions.
As part of its monetary policy review in early December, the NRB increased the loan threshold for property from Rs 15 million to Rs 20 million. Simultaneously, the central bank reduced the weighted risk on real estate lending and raised the monthly installment to income ratio to 60 percent.
The economic slowdown faced by Nepal in recent times, primarily attributed to a sharp decline in real estate transactions, prompted Finance Minister Prakash Sharan Mahat to advocate for flexibility in the real estate sector.
However, despite the overall positive trend, property developers have expressed dissatisfaction, particularly concerning the surge in transactions being skewed towards small investors.
Bhesh Raj Lohani, President of Nepal Land and Housing Developers’ Federation, remarked, “There was a nominal growth in the transaction, as the NRB addressed only the issues of small investors, ignoring largely the big investors.”
Comparing recent data, the DoLMA reported 41,851 real estate transactions and revenue collection of Rs 2.86 billion during mid-November and mid-December. In the preceding month, mid-October to mid-November, 26,046 real estate transactions were recorded, accumulating Rs 2.16 billion in government revenue.
The current positive momentum in real estate transactions suggests a hopeful trajectory for the sector, backed by the supportive measures taken by both banks and regulatory authorities.