As buyers withhold procurement plan anticipating a price drop, realty transactions in two districts of Kathmandu Valley have spiraled down substantially during the last one month (mid-May to mid-June). Records at the Department of Lard Reforms and Management (DoLRM) show that transactions dropped by 15 to 45 percent in the 11th month of 2008/09, compared to the previous month, at land revenue offices in Kathmandu and Lalitpur districts. Land transactions were faring through a double-digit growth every month at those offices till the first eight months of the fiscal year. Transactions are still growing at positive rate in Bhaktapur though, stated Raju Basnet, planning officer at the Department. Among the three LROs in Kathmandu, transactions have dipped the most at Chabahil that covers deals from the eastern and northern parts of Kathmandu. Said Dhruba Bahadur Singh, an official there, daily transactions at the office have dropped to an average of 150, whereas it used to cross 300 deals a day till last month. The number of transactions in Lalitpur too have dropped by about 15 percent, compared to the previous month. As a result, revenue collection of the government dropped by 22 percent to Rs 237 million during the eleventh month of the fiscal year. Government´s revenue collections had totalled almost Rs 400 million in the eighth month of the fiscal year, when realty transactions touched its peak. However, market had started to stagnate from the 9th month (mid-March to mid-April) of the fiscal year, with revenue collection slowing down in the following months. Raghunath Adhikari, chief of Kalanki LRO, attributed the present slowdown as an impact of the banks´ and financial institutions´ tightening their lending in the sector. Banks and financial institutions have mainly refrained from lending in the sector after Nepal Rastra Bank (NRB) warned them that real estate boom was unnatural and instructed them not to make further investments in the sector. The commercial banks have invested about Rs 30 billion in the sector, and the central bank has tagged it unsafe, as realty burst, if happens, will straight away subject those investments to risk. Following the warning by the central bank, property dealers stated that the buyers have developed a perception that the realty bubble is on the verge of burst and have preferred to ´wait´ for now. “They (buyers) have anticipated prices to fall and hence, have withheld their procurement plan for now,” said an official of Nepal Land and Housing Developers´ Association. Present stagnation has not impacted the prices of the property though, which have more than doubled over the past one year. Despite the latest slowdown, the government has already mobilized Rs 6 billion in revenue from the sector over the first eleven months of the fiscal year. The collection is far above the target set for the year, which is Rs 4.80 billion.
Source: Republica