Land Revenue Office (LRO) in Kaski in 2009/10 collected Rs 392.80 million in revenue from fresh realty transactions, which was 40 percent above the target set for the year.
However, breakdown of collections suggests that the largest chunk of that revenue had come in the first half of the fiscal year. “It was during this period the real estate bubble had swollen dramatically in the city of Pokhara,” said Rishi Ram Lamichhane, chief of the LRO.
Figures at the LRO show that transactions in the second half of the fiscal year dropped by as much as 80 percent compared to the first half.
A total of 34,408 new land deals were registered with the LRO during the year.
The number was 11 percent rise over transactions recorded in the previous year. In 2008/09, the LRO had registered a total of 31,119 transactions. Together, those had fetched revenue of Rs 181 million only.
Photo: Pokhara from Peace Stupa
Records at the office further show that highest number of transactions were recorded in the month of December 2009, about a month before Nepal Rastra Bank (NRB) imposed cap on banks and financial institutions to regulate loans to the sector.
“In a single month of December, we had collected revenue of Rs 57 million, which was about half of what we collected in the whole of the previous fiscal year,” said Lamichhane.
However, following the imposition of NRB cap, a measure adopted to cool down the realty market, the monthly collections of the office has dropped to as low as Rs 10.2 million.
As per the NRB´s new rule, the banks and financial institutions were required to limit their realty loans portfolio to 40 percent of total lending by mid-July 2010. They have further been asked to bring this portfolio down to 25 percent of total loans by 2011/12.
Because of such directives, the banks and financial institutions tightened their loans to the sector.
Continuation of liquidity crunch that first surfaced in late September too had constricted lending and also caused the realty lending rates to jump by as much as 8 percent in the span of a few months. These largely drove away the buyers, causing demand to plummet sharply.
“Transactions have continued to dip since NRB intervened in the sector,” said Lamichhane.
Courtesy: Manoj Adhikari