Monday, January 24, 2011

Government to open apartments for expats

There is some good news for the expat community living in Nepal if the government consolidates its preliminary plan to loosen its policy on real estate. The government is planning to ‘let foreigners buy apartments’ in Nepal.
“The plan is in its preliminary phase,” said Finance Secretary Rameshwor Khanal. “The government has floated an idea of letting the foreigners buy human-erected property.”
The move is aimed at giving momentum to the construction sector, one of the growth sectors in recent times. “However, the government is conscious about socio-cultural fabric and potential market collapse in case of mass selling and exit of foreigners,” said Khanal, adding, opening the sector for foreigners ‘to buy apartments’ is one of the ways that can make the construction sector dynamic.
As per existing laws, a foreigner is not allowed to buy land, house or apartments in Nepal as citizenship is a must to buy such immoveable property. Though, the market last year witnessed a boom in the construction sector in the wake of increased demand for housing and apartments, this year it has seen a sluggish growth. “The stagnation proves that last year’s boom was more speculative than intrinsic demand,” added Khanal.
However, construction is one of the sectors with competitive advantage with the potential to create more jobs, and it also contributes to economic growth.
The Central Bureau of Statistics has also predicted construction sector’s increased contribution, 6.62 per cent, to the gross domestic product (GDP) in the last fiscal, compared to a previous fiscal year, due to increase of construction activities by both the government and private sector. For Nepalis, housing traditionally is a social security and a basic need.
“There is no exact data of demand for apartments, though, there is still a growing demand for housing,” said Om Rajbhandary, Managing Director of Comfort Housing. “About 279,000 housing units will be required in next 10 years,” said Rajbhandary, adding, the Kathmandu Valley alone requires around 40,300 units ever year, apart from one million houses that need maintenance.
The need of housing is more in the urban areas. Due to various reasons, the urban area is expanding by 5.6 per cent annually. The Kathmandu Valley alone has 54.5 per cent of the urban population while that of Nepal stands at 15 per cent.
But the class that is in need of housing units the most lacks the purchasing power. “Until that class strengthens its purchasing power, the sector needs fresh capital injection to keep its momentum,” said Khanal. “Allowing foreigners to buy apartments could keep the sector alive and kicking.”
The private developers are major players in the construction sector, and the government has also tried to fulfil the demand through announcing Janata Awas (people’s housing) in its last fiscal budget.

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