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Kathmandu,Thursday April 06, 2000 Chaitra 24, 2056.
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Real estate shows signs of slow upturn
By Ram Sharan Sedhai
KATHMANDU, April 5 - The real estate business, which saw
nose-dive after 1993/94 and substantial downturn in the subsequent years, has begun to
show some signs of upturn lately.
The downward trend is closer to stagnation and people are
hopeful that the transaction of real estate is ‘slowly’ beginning to take shape.
Buddhi Narayan Shrestha, President of International Real
Estate Federation (FIABCI) Nepal Chapter, says taking 1993/94 as base year, the price of
real estate dipped by 6 percent, which reached to the height of 13.6 percent in 1996/97
and came back to 6.1 percent in 1999/2000.
In an average, the price of real estate plunged by 48 percent
during the five years period, says he. This trend has improved significantly in the last
seven-eight months, says he.
"The price of partial land (small pieces of land) has
already begun to move upward but the price of large partial land has not shown the sign of
upward movement yet," he adds.
Cyclical factor - that the slump was too long and deep could
be one important explanation - but the ascendance of majority government also contributed
significantly to this newfound confidence, say observers.
The record at the Kathmandu metropolis also shows that
Building Construction Permission Certificate issuance went down by 45 percent over the
years, taking 1993/94 as base year.
Experts blame political instability in particular and other
new avenues for investment like joint venture banks, share markets and finance companies
as the factors which diverted investment from real estate business inviting the
unwarranted slump in the mid nineties.
Moreover, lack of infrastructure, perennial problem of
drinking water and mounting problem of waste management, especially in big cities, were
the major players behind the slowdown of the business.
Government’s decentralization policy, land consolidation
and land use planning, removal of carpet factories from core areas of the capital, opening
up of a large number of higher secondary schools outside the Kathmandu valley, the steady
increment in land registration fee and capitalists freezing money have been cited as other
reasons that has pushed the price of real estate down.
Real estate began appreciating in 1983/84 and the upturn
lasted for a decade as carpet and garment industries boomed during the period. Middlemen
further played an important role in pushing it higher. People from grassroots to even
prominent political leaders and businessmen took it as a business rendering the
transaction more lucrative, says Buddhi Narayan Shrestha, who is also the Managing
Director of Bhumichitra Mapping and Land Development Company.
Of all these factors, Min Man Shrestha, Director of Downtown
Housing, argues that political instability of the mid-nineties was the major contributor
behind the real estate bust.
Dil Bikash Rajbhandari, Managing Director of Homeland
Company, has a similar point of view. "Political instability is the principal reason
behind the degradation of real estate business," says he.
Rajbhandari even went to the extent of saying that one of the
main causes of the business slump is the nine-month rule of the Communist Party of Nepal -
Unified Marxist Leninist (CPN-UML), which came into power in 1995.
He says, "The UML during the electioneering in 1995 had
said that it would redistribute land. It so happened that the party came into power after
the election. Fearing the party’s election slogan people stopped buying land and
building further plunging the price."
People involved in real estate business say that investors do
not fully trust even the present government, which could be one of the reasons behind the
slow upturn in real estate price. The rebound has also been lingered mainly because
"the politicians and the bureaucrats, who have the chunk of money do not want to
invest in this sector," says Rajbhandari.
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