Low-end housing in high demand

Low end housing products are in high demand in the Valley, according to a study on housing market released here today.

Stand alone housing or apartments priced between Rs 5 million and Rs 10 million are in high demand in the Valley, said the study ‘Real Estate Market Outlook 2013’ conducted by Brihat Investment in the Kathmandu Valley.
There is a higher demand for low end, ready to move in and instant ownership transferable units, said coordinator of Urban Development Forum under the Federation of Nepalese Chamber of Commerce and Industry (FNCCI) Om Raj Bhandari, presenting the report that has revealed that most of the customers are seeking cheaper housing products.

Though customers are also interested in apartments, the demand is still high for independent housing units, he said, adding that some 76 per cent of housing projects have already been sold, while only 51 per cent of apartment projects have been sold as of this July. “There are a total of 1,975 housing units and 4,307 apartment units in the valley.”
Of them , some 82 per cent of housing and 72 per cent of apartment projects were sold had price range of Rs 5-10 million, the report revealed, adding that of the 858 housing units with a price tag between Rs 5 million to Rs 10 million, some 702 were sold. “Likewise, 829 out of the 1,147 apartment units in the price category of Rs 5 million to Rs 10 million were also sold.”
The average price for housing units stands at Rs 12.3 million, whereas the price of an apartment unit is Rs 9.2 million, it added.

But the sale is not discouraging, Raj Bhandari said, adding that some 59 per cent of the housing and apartment units have been sold.

The survey has covered 22 housing projects – out of 50 – and 22 apartment projects – out of 66 – in the Kathmandu Valley, which is 44 per cent of housing projects and 33 per cent of apartment projects.
The real estate sector that has over Rs 100 billion investment as according to the report the total amount of the surveyed projects alone have an investment of around Rs 64.4 billion, including Rs 24.25 billion in housing projects and Rs 39.75 billion in apartment projects that is 37 per cent and 63 per cent, respectively.

“Some 467 units of homes and 2,107 units of apartment are on sale at present,” according to the report. “Considering the current trend at which housing and apartment units are being sold, it might take between 14 and 41 months to clear off the inventory.”
The report also revealed that the apartments in Lalitpur are facing difficulty in sales. “Likewise, fiscal year 2007-08 saw the highest number of housing and apartment projects registration and launching but they have been declining in the later fiscal years.”The report has listed preference for owner built houses, lack of buyer confidence, change in customer preference and lack of flexible financial plans as some of the major challenges.

Speaking on the occasion, president of Nepal Land and Housing Developers Association (NLHDA) Ichchha Raj Tamang urged the government and the banks and financial institutions to liberalise lending policy for the realty sector as it has tremendous growth potential.

Cooperatives Housing Policy on cards

Joint secretary at the Ministry of Urban Development Suresh Prakash Acharya, on the occasion, said that the ministry is trying to introduce a slew of new concepts in the real estate sector including National Housing Policy.
“The ministry is introducing cooperative housing concept to cater to lower-middle- and middle-income groups through cooperatives,” he said, adding that the ministry is also introducing a new working plan to separate rental housing – specifically designed for urban poor – as 40 per cent of the urban population lives in rental. “In Kathmandu Valley alone, some 58 per cent people live in rental, according to the latest census,” Acharya added.
However, almost 50 per cent of the households in Kathmandu Valley live on rent, according to Nepal Living Standards Survey 2010-11. “The Employment Provident Fund (EPF) that lends the government employees, who are its depositors, for housing could be attracted to the housing projects.”

Loan exposure to realty sector dropped

Loan exposure of banks and financial institutions to the realty sector has dropped to 8.7 per cent, according to central bank deputy governor Maha Prasad Adhikari. The central bank in 2009 tightened lending to the realty sector by the banks and financial institutions as they were overexposed to in the single sector increasing systemic risk. “The central bank put a breaker to the speculative real estate market three years ago,” he said, adding that the intervention has saved the financial system as it is sound today. “There is no threat to the financial system from existing real estate loans as it has plunged to 8.7 per cent compared 14 percent recorded some three and half years ago. Total lending in the realty sector – including individual land plots and homes – has reached Rs 153 billion. If lending on individual land plots and homes is excluded, it comes down to Rs 64 billion. However, the housing projects within reach of the common people would not only boost the buyers’ confidence but also expands market for managed housing.” Adhikari added.