REALTY transactions have slowed down in the Kathmandu Valley with revenue collection down 59.13 percent in the first seven months of the current fiscal year. The real estate sector is passing through hard times and prices have dropped, said traders. The slump is reflected in the decline in revenue collection at the five Land Revenue Offices (LROs) in the valley to Rs 895.99 million from Rs 2.19 billion in the same period last year. According to the Department of Land Reforms and Management, revenue collection at the Dilli Bazaar LRO was down 52.95 percent, Chabahil LRO down 61.41 percent and Kalanki LRO down 63.22 percent. The Lalitpur and Bhaktapur LROs also reported a fall in income. Realty dealers said tightening of realty loans by banks and financial institutions (BFIs), imposition of capital gains tax and provision of income source disclosure were the major factors behind the downturn. Under the income disclosure requirement, buyers have to show their source of income when purchasing land worth more than Rs 3 million and houses valued at over Rs 5 million. “A slowdown in the government’s development budget spending has affected the sector,” said Ichha Bahadur Wagle, vice president of the Nepal Land and Housing Developers Association. “Profit margins have declined 20-30 percent,” he added. Realty dealers said the sector was witnessing a price correction. “There was a kind of artificial growth in land prices two years ago which is now being corrected,” said Wagle. Though prices at prime locations haven’t been affected, they have dropped on the outskirts of Kathmandu, Lalitpur and Bhaktapur cities. According to realty traders, small developers had been forced to sell their lands with a small profit margin after BFIs pressured them to pay back their loans. However, big land developers are still holding on to their lands. With the central bank’s directives to limit lending exposure to the realty sector, BFIs are also under pressure to downsize their credit.
source: thekathmandupost