Infrastructure and Real Estate

The review period witnessed reforms and new developments in the aviation, and the real estate sector. The unseasonal heavy rains have caused further damage to the already fragile road infrastructure all around the country. With Nepal currently in political transition, infrastructure projects which have been completed are unable to commence their operation.

Damage to Physical Infrastructure Totaled NPR

1.3 Billion: Nepal’s physical infrastructures have sustained a damage of NPR 1.3 billion (USD 10.92 million) from the recent floods and landslides caused by heavy rain.129 Parts of Arnico Highway, Tribhuvan Highway, Rapti Highway, B.P. Highway, Mahendra Highway, and Pushpalal Highway has sustained damages.130 The Department of Roads estimate NPR 250 million (USD 2.09 million) worth damage to roads, and NPR 1.05 billion (USD 8.81 million) worth damage to bridges. A total of 15 bridges are fully or partially damaged.131

Yeti Airlines Gains Permit for

International Flights: After the successful test flight from Kathmandu to Varanasi in March 2021, Yeti Airlines has received permission from Civil Aviation Authority Nepal (CAAN) to carry out international flights. The airline has been approved to conduct chartered and nonchartered flights with cargos or passengers to several countries in South Asia, and Southeast Asia.132 Yeti Airlines will fly to Thailand, Myanmar, Cambodia, Singapore in Southeast Asia, and to India, Sri Lanka, and Pakistan in South Asia.133 Yeti Airlines joins Nepal Airlines, Himalayan Airlines, Buddha Air, and Shree Airlines who have already received their Air Operator’s Certificate (AOC) for international flights.134

Reforms in the Aviation Sector

Promised: The new minister for Ministry of Culture, Tourism and Aviation Prem Ale has announced his plans to utilize the unused aircrafts of Nepal Airlines Corporation (NAC) for international flights. He also intends to remove Nepal from the blacklist of International Civil Aviation Organization (ICAO). The minister has expressed his commitment to not delegate NAC’s ground handling tasks to private companies as was the case before.135 The minister has also directed NAC to implement e-ticketing system and stressed the importance of making the national carrier, nationally and internationally, competitive.136

Roadblocks for Nepal-India

Railway Service: Despite the signing of standard operating procedures of Nepal-India cross border railway service, which is operating from Jaynagar in India to Bardibas in Nepal, Nepal is still behind on bringing the service to operation. The former Oliled government had introduced an ordinance for railway management, but it has become invalid after the government failed to get parliament approval. Nepal Railway Company also fired over 150 staffs hired by the previous government stating that they were “political appointees”. Due to the lack of relevant laws and human resource, the Diesel Electric Multiple Unit train procured in September of last year has remained idle in Janakpur.137

Banks and Financial Institutions Requested to Accept Rural Land as Collateral: In a meeting with the Governor of the Central Bank of Nepal and the CEO of Rastriya Banijya Bank, the finance minister has requested Banks and Financial Institutions (BFIs) to accept rural land which have not been connected to motorways as a collateral for loan. Currently, banks only accept land which are connected to motorways as collateral for loan which has led to farmers not receiving loans.138

Workplan for Kathmandu’s First Smart City has Started: Among the 4 smart cities, “Ishan City” will be the first to get an Infrastructure Development Plan from the Kathmandu Valley Development Authority and the

Ministry of Urban Development. The proposed workplan has not been approved by the Infrastructure Development Committee which is chaired by the Minister of Urban Development. Kathmandu Valley Development Authority believes that the land pooling work on the Ishan City can be started.139

National Housing Price Index

Introduced: Nepal Rastra Bank has released the National Housing Price Index which reports on real estate prices and will be released every 3 months from now on. Based on banking data, the index showed that the average annual inflation for real estate in Nepal was 26.45% in the fiscal year 2019/2020, and 16.31% in the first 9 months of fiscal year 2020/21. Based on data from Land Revenue Office, the index showed only 19.73% inflation in the fiscal year 2019/2020, and 12.56% in the first 9 months of fiscal year 2020/21. Karnali Province showed the highest change of 23.88% based on Land Revenue Office data, and Gandaki Province showed the highest change of 19.19% based on banking data in the first 9 months of fiscal year 2020/21. The index has been prepared by collecting data from 20 locations in 20 districts, which has been selected considering the geographical location, frequency of real estate transaction, and availability of data.140

OUTLOOK

Nepal is among the most vulnerable countries to climate change and is prone to natural disasters such as earthquake. Roads and bridges are one of the most common modes of transportation in the country. Nepal needs to ensure that its roads and bridges are resilient by eliminating barriers to high quality road construction such as insufficient budget allocation, corruption, and lack of reliable contractors. For the successful operation of upcoming international airports in Nepal and flying of Nepal’s airlines in the international airspace, the aviation sector must be strengthened with reforms and regulations, that are in line with International Civil Aviation Organization (ICAO). The political instability and incomplete federalism exercise have hindered several development projects. However, after the elections in September of 2022, halted infrastructure projects such as the Nepal-India railway service can be expected to come into operation.

The BFIs have shown an interest in funding the 7-year smart city project around Kathmandu Valley which will adequately fund the construction of these cities and ensure their completion. The introduction of National Housing Price Index will increase the availability and reliability of real estate data in Nepal and work towards achieving the monetary policy objectives of price stability and financing stability.