Housing prices drop by 30 per cent

House and land prices have declined by around 30 per cent as compared to last year, whereas transaction has dropped by almost half, according to a central bank survey.

Some 43 per cent developers expect prices of land and housing to go up by 15 per cent to 30 per cent, the survey revealed, adding that a very few –around 22 per cent of them – still expect prices to go down, whereas some 35 per cent expect no movement in the prices anytime soon within six months to a year.

"Similarly, land and housing transactions have dropped by 40 per cent to 50 per cent due to lack of finance that was earlier easier to obtain from banks and financial institutions," it said, adding that some 44 per cent developers expect real estate business may not see any remarkable progress any time soon due to problems related to bank loans, tax on capital gain, source of income verification, and no basis for price determination.

"The remaining 40 per cent of the developers expect transactions to pick up by around 20 per cent," said the central bank's quick field survey of Land Offices, municipalities, urban development agencies, members of district chambers, and land and housing developers in 10 major districts — Morang, Dhanusha, Parsa, Rupandehi, Kaski, Banke and Kailali — including three districts in the valley – Kathmandu, Lalitpur and Bhaktapur – to gauge the risks due to higher exposure of banks and financial institutions in a single sector.

Land and housing witnessed a surge in price a couple of years back instigating a bubble.

The central bank conducted the study after most banks and financial institutions got trapped in the bubble, posing threats of a systemic failure in the financial system, it said.

However, housing entrepreneurs still believe that the government's policy laxity in framing a clear and stable real estate policy has hit business hard, making them struggle to pay even the interest on loans taken from banks and financial institutions.

Likewise, the report has also revealed that revenue from land and housing dropped by 41.89 per cent in the last fiscal year as compared to a fiscal year ago.

 

Price Perception

Prices to go up by 15 per cent to 30 per cent — 43 per cent

Prices will see no change — 35 per cent

Prices will go down — 22 per cent

(Source: Nepal Rastra Bank)