Thursday, December 22, 2011

Government plans to rescue housing sector

The Finance Ministry has pointed out the price adjustment as a way out for the housing developers from the current dumps.
Talking to the media at his office today, finance minister Barsha Man Pun said that the government is planning to bring a rescue package to the housing, if the developers are ready to lower the price down.
"The price should come down and the government will think of helping them out of the current slump," he said, adding that the ministry is suggesting the residential builders to transform the apartments to apartment hotels as the tourist arrivals have seen an encouraging growth and the hotels have been unable to accommodate them.
Pun also assured that the government can buy some of the apartments, if the need arises and use it.
A study conducted by Nepal Rastra Bank (NRB) has revealed that the real estate is over priced by 30 per cent since last three years. Despite the cool down of the market from last one year the real estate price has not seen any adjustment. The central bank has also forwarded price revision as the solution for the relaters to stimulate the market.
The realtors have been pressurising the government and the central bank to come up with plan in order to salvage them from the bust. They have been demanding refinancing and restructuring facility from the central bank on the loans they have borrowed to construct the buildings. The sales of the housing and land units have gone down in recent times as the speculators in the realty have realised the asset price will not increase any time soon like it did during boom.
The contraction in demand has made the loan repayment for the development a difficult affair.Central bank governor Dr Yubaraj Khatiwada has also cautioned that with the burst of real estate bubble, the amount of Non Performing Assets (NPA) of the financial institutions will be going up in the near future.
"The financial institutions' loans to real estate will be going bad following their inability to pay back loans as asset price will not skyrocket once again like it had before," he said, warning that the financial institutions that have disregarded regulators' direction and lent more than 60 per cent of collateral valuation will be the one to get in trouble first.

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