Nepal Rastra Bank announced a rather disappointing policy for the real estate market. Despite the unfavorable policies, statistics prove that the market is definitely flourishing.
Nepal Rastra Bank announced a dissapoinitng monetary policy for the real estate market for the year 2017/18 on july 9th. The three main clauses that affect the real estate and housing market are:
- From previous year’s 50% maximum financing through LTV(Loan to value ratio), it is now lowered to only 40% of maximum loan financing. Meaning, if one needed financing through any BFIs(Banks and Financial Institutions) a property valued at 1 crore will only get 40lakhs financing contrary to previous year’s 50lakhs. However, this policy has only changed within the valley, the ratio of other places has been kept unchanged at the exisiting 50%.
- Similarly, the maximum LTV ratio for residential housing loan is lowered to 50% within the valley, whereas it has remained unchanged at 60% for other places.
- The limit however for maximum financing for personal homes provided by BFIs has increased from exisiting 10million to 15million.
The Real Estate Market in Nepal is flourishing despite the unsuitable monetary policy announced by Nepal Rastra Bank and the steep raises in land and home prices can attest to it, especially within the Kathmandu valley. Soaring prices in the city’s core area, starting from Rs1 crore per ana onwards in prime localities like New Road, Durbarmarg, etc are still selling like hot cakes.
At this pace, in which the property is selling, despite the baffling prices, confirms that the real estate market is bound to thrive no matter what natural disasters may befall us. A survey conducted by Brihat Property Solutions involving 43 currently active housing projects yielded, total units of 3875 houses with already sold 2961units and the remaining 914 units.
In average it was found, each month 117 houses were sold i.e. 3.02% of the total surveyed. At this rate of demand the remaining 914 units could be sold within 8 months, in the case of no new supplies and favorable monetary policy. This indicates just how big the housing market is with just a few suppliers, ultimately creating housing shortages and creating profitability with high raise in prices. Hence, this is probably the best time to invest.