Real Estate

REAL ESTATE REAL ESTATE

The real state sector which contributes about 11.3 percent to the real GDP of the country, has been almost in a standstill since the lockdown. The pandemic has not only affected the production of construction material, it has also impacted the overall completion and deliverance of various projects. With the weakening sales velocity and travel ban, cash flow has been at its minimum. Though the local governments have made efforts to ease the problems by providing tax reduction, the overall impact of the virus has been vicious to this sector.

Government updates National

Building Code: The National Building Code (NBC), which covers the general building design requirements in accordance to principals stated in the Bhawan Ain 2055, has been updated by the government of Nepal incorporating it into all structural designs that are necessary to make buildings, both small and large, earthquake-resistant in the country.

Taking into account the damage caused by the 2015 earthquake and disasters recorded over a period of 25 years across the world, the NBC has been updated to insure safe and earthquake-resistant buildings. With the approval of the Council of Ministers, the NBC 105:1994 has been replaced by NBC 105:2020. Before this, due to the lack of an updated NBC of the country, Nepal had been depending upon NBC of India to make earthquake-resistance building. With the now updated Code, Nepal will no longer need to depend on foreign NBC which it had been doing for the past two decade.

The updated NBC, which is completely based on the seismic hazard analysis of Nepal, incorporates separate indicators for designs and drawing of the building on the basis of seismic hazard assessment in conformance with the geographic location. It would also address the present needs for infrastructure resilience as it includes all provisions, standards and procedures with regards to earthquake-resilient buildings.

Real estate sales down 35 percent in

Kathmandu: After the lockdown on March 24 to control the pandemic, the real estate sector has been hit severely. Since then, the transactions have dropped by around 35 percent as compared to the previous months before the lockdown. As per the Land Revenue Office (LRO), there were transactions of 1,234 units of houses and land in January and 1,269 units of houses and land in February. However, only 861 transactions were recorded in June. This is almost a decline of one third in the sector.

As the sales and purchases through real estate agencies have completely stopped for over two and a half months, the revenue collected by the LRO has also been effected. According to the LRO, only NPR 193.67 million had been collected in the month of June, while NPR 292.77 million was collected in the month of February. With basically no sales and purchases in this sector, banks have ample liquidity as no new loans have been approved. This, however, sheds a new light, as it could increase the overall transactions after summer.

Banks to offer up to 60 percent

housing loans: Previously, banks were allowed to provide 50 percent on housing loans. However, now, with the new arrangements made by the Nepal Rastra Bank (NRB), home loan limit has increased to 60 percent. NRB made the arrangements as part of the monetary policy for the current fiscal year. With this new arrangement the limit of the load security value ratio for the housing projects under construction approved by the GON and for the construction of the first house of an individual will be fixed at 60 percent.

2.36 million Nepalis scared of losing home or land: According to the study, Prindex, around 2.36 million Nepalese adult expect to be forced out of their homes against their will within the next five years. The report revealed that 12 percent of the adults in Nepal feel insecure about their land and property. Disagreements

with family or relatives was the top cited reason for insecurity. 11 percent of the adults feel insecure about their rights to their homes with females (15 percent) in Nepal being more insecure than their male (10 percent) counterparts.

Globally however, Nepal’s scorecard is relatively better than the average, in which about one in five adults said they were worried or insecure that their houses, fields or other lands could be taken away from them.

The survey, conducted by US polling firm Gallup, is the largest-ever effort documenting how people feel about their homes and land at a global level. Since this survey was conducted prior to the COVID-19 outbreak, the level of insecurities now, exacerbated by the slumping economy around the world, might be under-represented.

“OUTLOOK

Since the lock down, the real estate sector has been in a standstill. Though the government of Nepal has allowed construction and flow of materials for the completions of buildings to be carried on despite the restrictions, project deliveries are sure to be deferred. Plus with the already sluggish economic growth of the nation, the real estate sector is expected to decline further. From the prices of the raw materials to overall supply of the labour force, this pandemic is bringing an adverse impact on the prevailing liquidity crunch, which is creating a high inventory overhang with the subdued demand conditions.