KATHMANDU, MAY 08 -
Banks and financial institutions (BFIs) are still shy of lending to
developers of realty projects, but they have been readily issuing loans
to home buyers. Over the last one year, the issuance of home loans of up
to Rs 10 million has increased by Rs 19 billion.
According to Nepal Rastra Bank (NRB), home loans surged to Rs 77
billion in February 2014 from Rs 58 billion in February 2013. On the
other hand, real estate loans have continued to decline. Realty loans
came down by Rs 7 billion to Rs 82.8 billion during the review period.
The government has classed home loans of up to Rs 10 million as being
outside the real estate category, which also contributed to the rise in
home loans and a decline in realty loans. Lending by all commercial,
development banks and finance companies to home buyers has risen.
Meanwhile, loan exposure to real estate was recorded at 7.8 percent as
of February 2014, which is well below the 10 percent maximum limit set
by the central bank. Development banks have 8.36 percent loan exposure
to real estate.
"Exposure to real estate has decreased significantly, and the current
level of exposure won't affect the financial system badly," said Hari
Prasad Kafle, executive director of NRB. Development banks and finance
companies which had relatively higher exposure to real estate have
reduced their lending to the sector. Bankers said that home loans were
one of the less risky sectors to invest in as they are issued to people
who want to own homes, and have a regular income source and cash flow.
In order to attract people towards home loans, banks have reduced the
interest rate up to 8 percent. Excess liquidity with banks has also
helped to reduce the interest rate and increase investment in the
sector.
"Interest rates on home loans are one of the lowest in the market,"
said Sashin Joshi, chief executive officer of NIC Bank Asia. According
to him, those wishing to purchase land to build a house are getting
loans amounting up to 50 percent of the value of the collateral.
"Likewise, for those purchasing land and houses, loans have gone up to
70 percent of the value of the collateral," he said.
However, BFIs are hardly lending to developers. After a few housing
projects went into a tailspin, BFIs have been reluctant to put money in
housing and apartment projects.
"We have not made any fresh loan commitments to any new housing
project," said Ratna Raj Bajracharya, chief executive officer of Global
IME Bank. "In fact, no new project has come forward with a loan
proposal."
He added that his bank had been lending money to projects to which it
has pledged financing, and the loan recovery from these projects has
been satisfactory. The interest rate for such projects is 12-12.5
percent currently, down from 14 percent earlier.
According to the Nepal Land and Housing Developers' Association
(NLHDA), out of the 9,000 apartment built after 2005, around 5,500 have
been sold. Developers said that sales of apartments had swelled lately
due to increased lending by banks to buyers.
Apart from apartment sales, the trend of renting out flats after buying
them has also risen. Facilities like electricity, regular drinking
water supply and security have attracted people towards apartments.
This trend has helped housing projects regain momentum. "As most of the
buyers live in foreign countries, they tend to rent out their
property," said developers.
Prices of apartments have remained largely stable over the last two
years despite rising inflation. "That's one reason why buyers have been
increasingly attracted to purchasing apartments now," said Joshi.
According to him, lending to buyers to purchase completed apartments has
increased. However, banks are not giving loans to developers as many
units are yet to be sold.
Bankers said that the issuance of loans to developers could also
increase in the days to come provided projects were developed as per the
need of the middle class. They said that banks would find it hard to
lend to projects that are expensive and which people cannot afford as
investing in them would be risky.
In the past, developers constructed apartment units costing more than
Rs 10 million which bankers said were not affordable to many. "There is a
chance of increasing loans to developers too provided they shift their
focus to building affordable housing," said Bajracharya.
Two years ago, when apartments were lying unsold, NRB had urged
developers to slash prices and sell them off to avoid accumulating
outstanding principal and interest payments waiting for wealthy
customers.
Developers have admitted that mid- and low-range apartments and homes
have been selling well. Houses and apartments with price tags of between
Rs 5 million to Rs 10 million are in high demand in the Kathmandu
valley, revealed a 2013 study carried out by Brihat Investment, a
research company. About 82 percent of the houses and 72 percent of the
apartments sold were in the price range of Rs 5-10 million.
No comments:
Post a Comment