Tuesday, March 13, 2012

Reserved Optimism

KATHMANDU, MAR 4, 2012

Reserved The realty is expecting some boom with significant growth in interest of the buyers and investment in the sector. With Nepal Rastra Bank easing up and some relief provided by the budget earlier this year, transactions have soared in the recent months. In addition to this, Department of Land Reform and Management is hopeful about achieving its goals regarding revenue collection in the current financial year, restoring the sector to its previous glory.

“However, it is too early to assume the realty will redeem itself from ongoing recession,” says Kamal Prasad Timalsina, undersecretary of Department of Land Reform and Management. According to him, the winter season is the peak season for the transactions related to land, raising the revenue collection.

As Nepali months of Poush and Magh are off-season for usual agricultural activity, they are most preferred time for purchasing and selling of the lands and real estate. Hence, Timalsina considers it to be too early to determine that the rises are due to the actual recovery of the realty. “Nevertheless, we not just met but exceeded our target of Rs 405.58 millions by collecting Rs 416.56 millions, making the total collection surpass the estimation by additional two per cent,” he shares.

The Department of Land Reform and Management has already achieved 73.81 per cent of its target set forward in revenue collection for this financial year. He adds, “Our target is that of Rs 4.40 billion and if the current trend continues, we are almost sure to meet the remaining 26 per cent easily by the end of this fiscal year.”

Last year’s collection on land revenues compared to the same time this year was just Rs 273.31 million, which is less by Rs 140 million. Moreover, the changes in the policies regarding disclosure of income source for transaction above Rs 10 million from previous Rs 5 million ceiling and facility for investors and Non Resident Nepalis, recovery of A-grade banks from their investments in the real estate, et cetera can be seen as the contributing factor for revival of the sector in recent months.

Dilip Neupane, vice president of the Realtors, says, “The transactions have indeed risen in last two months, but the reforms regarding house loan interest still needs to be brought forward as the investments done so far are on the small plots rather than bigger one. In addition to this, if someone had bought a piece of land at the rate of Rs 1.50 million per aana through bank loan, his cost has now been added by the bank interest and gone up to around Rs 1.80 million. Thus, this has resulted in the holding of the land by many such property owners, restricting the smooth flow of transactions.”

According to him, until the bank loan eases from its current 13 to 14 per cent and relieves such investors, the authentic appraisal of the sector is still unrealistic.

“People do not have confidence while investing in the realty as they are worried that their cash will be frozen once invested in these immobile assets. Thus, to continue this ongoing acceleration, it is very essential to revise these flaws.”

While the experts admit to the current acceleration in the realty sector, they are still sceptic about the longevity of the gained momentum. Nevertheless, if the trend continues, the realty — especially the land — could be a safe landing for the sector.

Source: THT

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