Illegal occupants benefiting from govt's housing program

A parliamentary panel has found that the government approved the plan to construct houses under People´s Residence Program for people, who were occupying over 11,000 hectares of forest land in Kapilvastu district.

The 11-member sub-committee led by Raj Lal Yadav of the parliament´s Public Accounts Committee (PAC) had conducted a field study to all the three districts -- Kapilvastu, Siraha and Saptari -- where the program has been launched.

The government had introduced the populist program through the budget for the fiscal year 2009/10.

The government had allocated Rs 300 million to build 1,000 houses in each district for 3,000 households, targeting Dom, Musahar, Chamar, Dushad, Khatwe and other Dalit and disadvantaged Muslims.

The report states that over 4,000 households have been occupying 11,000 hectares of forest area of Hatausa, Hatausa and Pattariya VDC of Kapilvastu district for the last 17 years.

“It is an improper act and violation of law,” the report submitted to PAC on Monday states.

The construction of houses, however, has stopped due to objection of the Ministry of Forest and Soil Conservation (MoFSC). The cabinet had endorsed the plan forwarded by the Ministry of Physical Planning and Works (MoPPW) without seeking consent of the MoFSC.

“The government decided to resettle people who were involved in constructing illegal settlements by encroaching upon forest area. It is a policy flaw on the part of the government,” the report added.

The report has revealed that most of beneficiaries of the program were illegal occupants of forest area.

"Of the total 43 houses that were under construction, 33 houses were being built in the illegally occupied area," the report stated.

The cost of building each house was estimated at Rs 139,000. As per the program, the beneficiaries had to chip in Rs 10,000 each for the construction.

The sub-committee also found there was no proper arrangement of drinking water, roads and toilets for the housing areas in all three districts. The committee also found that seven houses were built in Chanai VDC without following the approved design.

A total of 846 houses have been constructed in six VDCs of Siraha with the cost of Rs 73.4 million. The panel found that the some of the houses constructed in the district lack minimum standards envisaged by the program.

The committee has recommended the government to form a monitoring committee led by elected people´s representative of the concerned district to oversee the construction of the houses.
source:republica

Look outward policy can resurrect real estate

Nepalis Direct Investment (NDI) and Foreign Direct Investment (FDI) can resurrect the domestic real estate business, according to a real estate entrepreneurs. “For those Non-resident Nepalis (NRNs), who want to create asset back home, the government can help them by making the policy favourable,” said Om Rajbhandari, managing director of Comfort Housing.

“In the first phase, we need to attract investments from the Nepalis living abroad,” he said, terming the NRNs Direct Investment as NDI, — a new phrase coined by him for investments.

“From their hard-earned money, the NRNs can create asset back home,” he said, adding that Nepal Land and Housing Development Association (NLHDA) can organise Housing Exhibition for those NRNs, who want to buy home back in Nepal.

He said that Nepal can also attract Foreign Direct Investment (FDI) by giving expats ownership of apartments. “In each apartment project, 20 per cent to 30 per cent of the total units could be allowed for the expats,” he said, adding that those expats, who are more than 50 years of age can get retirement visa and own an apartment in Nepal.

Meanwhile, the increasing trend of constructing unmanaged residential buildings in the fertile land has forced the government to revise the National Building Code to manage and facilitate modern amenities to address increasingly unmanaged urbanisation and housings.

The decade long insurgency has forced the people to migrate to the urban areas for security reasons speeding up the urbanisation without proper planning and infrastructure.

Among government, private builders and individuals, culturally, the individuals are more inclined to construction of houses as traditionally house gives a scene of security in the society. But the individual construction has been more unmanaged and unplanned.

“The private developers can create a small city or satellite city with all the necessary infrastructures that could lead to planned development,” said Rajbhandari, one of the private developers. “The planned city will serve as the focal point of the multiple dimensions, providing a variety of attractions that promote public enjoyment and appreciation of the area, acting as the anchor of the nation and promoting decentralisation concept too.”

With mass employment opportunities, Multi Dimension Cities (MDCs) will surely be beneficial for people and generate huge revenue for the government too.

The government has also planned 10 new modern cities for business and residential purposes in the vicinity of Mid-Hills Highway and North-South corridors. The budget for the current fiscal year has promised infrastructural mapping after the identification of the location and completion of their feasibility studies.

Though, the government has also been involved in the ‘People’s Housing Programme’ — that is given continuity in this fiscal year’s budget too — that is extended to Chepang, Raute and Kusunda community’s settlement areas, the private builders are the key players in the sector.

source: Himalayan News Service(2011),"Look outward policy can resurrect real estate", The Himalayan Times, 31 Jan 2011

Approach paper to bring reforms in the reality sector

The Finance Ministry has formed an internal committee to prepare an approach paper to bring reforms in the reality sector by allowing foreigners living or working here can buy apartments. The committee is expected to submit the approach paper on Monday, according to finance secretary Rameshwor Prasad Khanal. The government is planning to allow expatriates buy human-erected apartments.

More talks on flat-to-foreigner -40,300 new units needed every year by 2020

The Finance Ministry and Nepal Land and Housing Developers Association today held discussion on the proposed-draft to let expatriates buy apartments in Nepal. “We discussed with the finance ministry officials today on the positive and negative aspects of the proposed policy that is expected to give a boost to the construction sector,” one of the participants said.

In a major policy shift, the government is loosening its policy on real estate and letting foreigners buy apartments — human-erected property — aiming at giving momentum to the construction sector, one of the growth sectors in the recent times. “Opening the sector for foreigners to buy apartments is one of the ways that can make the construction sector dynamic,” the association said.
As per existing laws, a foreigner is not allowed to buy land, house or apartments in Nepal as citizenship is a must to buy such immovable property.

Though the market last year witnessed a boom in the construction sector in the wake of increased demand for housing and apartments, this year it has witnessed a sluggish growth. The stagnation that proves that last year’s boom was more speculative than intrinsic demand has hurt the growth of the sector.
Though there is a rising domestic demand, according to the association, the low purchasing capacity and no option for financing has slowed down the sector’s growth this year.
According to 2001 data, the urban population of Nepal totalled 15 per cent and expected to reach 18 per cent by 2015 and 30 per cent by 2030.

According to the revised Housing Policy, based on the population rise, the Urban Housing shortage is expected to rise by 215,357 units every year between 2063 and 2077 (3,015,000 units total) and 1,000,000 units need repair and maintenance. “In Kathmandu valley alone, by 2020, demand of 40,300 units per year is expected,” the data
reveals.
Similarly, around 87.6 per cent of the total population of Nepal has their own homes, according to the Nepal Rastra Bank’s Survey2008. “Of the total urban population, 88.5 per cent have their own homes while 10 per cent live in rented homes and 1.5 per cent live without paying rent,” it said, adding that in urban areas, 36.1 per cent live in nuclear units, 59.4 per cent live in joint units and 4.3 per cent live in commercial units.
“In urban areas, 60 per cent homes are concrete, 23.4 per cent homes are mix design and 16.6 per cent are kachhi,” the Survey added.

Residential area in ‘Greater Kathmandu’ has increased from 13.7 per cent in 1971 to 30.6 per cent in 1981 to 46 per cent in 1991-92.
Construction industry has recorded 5.7 per cent growth rate in 2008-09 which is notable as compared to other sub sectors.The Central Bureau of Statistics has also predicted construction sector’s increased contribution at 6.62 per cent to the GDP in the fiscal year 2009-10.

source: THT

National Real Estate Expo in Chitwan

Narayani Land and Housing Entrepreneurs Association is organizing land and housing fair 'National Real Estate Expo' in Ratnagar, Chitwan from February 18, 2011. This mega event will last for ten days.

The expo will have a total of 200 stalls featuring housing real estate companies, furniture dealers, construction materials and decoration materials, among others. The organizers have also invited land and housing entrepreneurs from across the country and non-residential Nepalis (NRNs) to attend the event. The organizers have included Sauraha, Devghat, Golaghat,Hatibang, Sirai Chuli, Maula Kalika Mandir, Ganeshsthan and Bish Hijari Taal, among others.

The organizers believe that the expo will give a boost to the housing sector. The organiser will bring attractive scheme to the participants of the fair‚ who purchase the land or house during the fair.

TCH Community Living - Thaiba Phase I

The Comfort Housing (TCH) Community Living Project at Thaiba Phase I is the housing colony projects from The Comfort Housing Pvt. Ltd. The Project is located at Thaiba, Lalitpur.

Project highlights:
> A balance between privacy and community activities.
> Environmentally sensitive designs laying more emphasis on quality living spaces with natural light and ventilation in the most optimized manner.
> Community open spaces comprising of flower beds and sit-outs.
> Round the clock security system.
> Treated water supply.
> Individual parking spaces.
> Swimming Pool.
> Generator backups for community spaces.
> NEA lines and NTC points.
> Fire Hydrants.
> A temple.

Night business faces axe from realty slump

The turmoil in real estate market has cast gloom on the night business of the capital city as it has greatly cut down the number of customers who spent lavishly for night entertainment services.

Officials of Night Business Entrepreneurs Association of Nepal (NBEAN) said the turnover of night business centers has gone down by an average of around 60 percent over the span of past one year.

“The business had caught downward spiral after government limited our operating hours to 12 midnight in 2008. The realty slowdown now has landed a lethal blow,” said Sameer Gurung, president of NBEAN.

Currently, there are about 2300 night business centers associated with NBEAN operating in the Kathmandu valley. They include 200 dance bars, 20 discos, 30 lounge bars, 45 pubs, 40 live bands, 20 gazhal restaurants and around 100 dohori restaurants. About another 2,000 restaurant and bars associated with Restaurant and Bar Association of Nepal (REBAN) too had been enjoying good earning through late evening and night services.

If figures issued by NBEAN and REBAN mean anything, people were spending as much as Rs 102.16 million for their services every day till a year ago. But now, the associations estimate the spending to have dropped to Rs 42.48 million.

The night businesses in the capital had got the boost largely from the remittance income and real estate boom. Entrepreneurs said the volume of remittance-based customers visiting their outlets has barely changed. “But the turnout of people engaged in property dealings has nosedived,” Gurung told Republica.

According to officials of NBEAN, people from real estate sector used to form the biggest segment of their customers and they used to spend lavishly -- some 30 percent more than other clients.

“After the fall of real estate sector, the dance bar, discos and lounge bars have suffered the most, recording well above 85 percent drop in their businesses,” told Subash Palung, spokesperson of NBEAN and proprietor of Babylon Discotheque.

According to him, medium standard discos in the capital like Babylon are presently making a total transaction of about Rs 20,000 per day, which is less by around 50 percent as compared to a year ago. In other categories, the drop is much sharper.

Restaurants and bars, too, are operating with half the total revenue of their normal business in the past, according to REBAN.

Dawng Lama, owner of Fire Club, Thamel, too said that his club has suffered some 80 percent dip in business over the past one year. “Previously, we used to make a turnover of around Rs 40,000 in one night,” he added, “But these days it?s tough even to get enough money to pay the rent.”

Similarly, Biswas Basnet, owner of Tipsy Lounge Bar established with an investment of Rs 10 million, said his bar has suffered some 45 percent drop in business after the real estate slump a year ago.

He also blamed the government for not creating appropriate environment to run the business. “We might find some relief only if the government allows us to operate till 2 am,” he added.
The drop in business, meanwhile, has spurred lay off and cut in salary in the night business units. Palungwa said he himself was offering some 50 to 60 percent less salary to his staff than before.

According to NBEAN, a total of 353,500 people work in different night business units. Of them, 16,250 people are working at dohori restaurants, 1500 at gazhal restaurants, 50,000 at dance restaurants and bars, 2,000 at lounge bars, 8,750 at pubs, 262,500 at restaurants and bars, 7,500 at live bands, and 5,000 people at discotheques. A single night business unit pays around Rs 25,000 as renewal fees, contributing in revenue Rs 50 million. Apart from that, they also pay income tax and generate VAT for the government.

source:Thapa, Ashok(2011),"Night business faces axe from realty slump",republica,25 Jan 2011

Ambe to bring Hi Tech Cement

Ambe Cement Pvt Ltd is introducing its new product, OPC 43 grade Hi Tech Cement in Nepali market soon.The company has expected that the new product will be useful to construct huge and towering buildings, roads, pools, and other big construction related projects. The company also aims to reduce import of cement and become self-reliant.

The company expects that all section of the society will encourage the company by using domestic cement product that is of high quality since it has maintained the quality.

Govt to open apartments for expats

There is some good news for the expat community living in Nepal if the government consolidates its preliminary plan to loosen its policy on real estate.

The government is planning to ‘let foreigners buy apartments’ in Nepal.

“The plan is in its preliminary phase,” said Finance Secretary Rameshwor Khanal. “The government has floated an idea of letting the foreigners buy human-erected property.”

The move is aimed at giving momentum to the construction sector, one of the growth sectors in recent times. “However, the government is conscious about socio-cultural fabric and potential market collapse in case of mass selling and exit of foreigners,” said Khanal, adding, opening the sector for foreigners ‘to buy apartments’ is one of the ways that can make the construction sector dynamic.

As per existing laws, a foreigner is not allowed to buy land, house or apartments in Nepal as citizenship is a must to buy such immoveable property.

Though, the market last year witnessed a boom in the construction sector in the wake of increased demand for housing and apartments, this year it has seen a sluggish growth. “The stagnation proves that last year’s boom was more speculative than intrinsic demand,” added Khanal.

However, construction is one of the sectors with competitive advantage with the potential to create more jobs, and it also contributes to economic growth.

The Central Bureau of Statistics has also predicted construction sector’s increased contribution, 6.62 per cent, to the gross domestic product in the last fiscal, compared to the previous fiscal, due to increase of construction activities by both the government and private sector.

For Nepalis, housing traditionally is a social security and a basic need.

“There is no exact data of demand for apartments, though, there is still a growing demand for housing,” said Om Rajbhandary, Managing Director of Comfort Housing. “About 279,000 housing units will be required in next 10 years,” said Rajbhandary, adding, the Kathmandu Valley alone requires around 40,300 units ever year, apart from one million houses that need maintenance.

The need of housing is more in the urban areas. Due to various reasons, the urban area is expanding by 5.6 per cent annually. The Kathmandu Valley alone has 54.5 per cent of the urban population while that of Nepal stands at 15 per cent.

But the class that is in need of housing units the most lacks the purchasing power. “Until that class strengthens its purchasing power, the sector needs fresh capital injection to keep its momentum,” said Khanal. “Allowing foreigners to buy apartments could keep the sector alive and kicking.”

The private developers are major players in the construction sector, and the government has also tried to fulfil the demand through announcing Janata Awas (people’s housing) in its last fiscal budget.

source: chalise,Kuber(2011),"Govt to open apartments for expats ", The Himalayan Times, 25 jan 2011

Advertisement from Padma Colony

Going Prefab from Concrete-the new trend in building houses

There was a time when the word house conjured an image of brick and concrete. But keep ing with the changing times, people have begun to increasingly opt for prefabricated houses, which were mostly popular only in the western countries until two decades ago.It is believed that it was in the early 90's that the prefabricated houses first entered the Nepali market. Today many people wanting to construct villas, site offices, extensions, dormitories, workshops, and factories are opting for prefabricated houses.

The foundations of prefabricated houses are generally constructed in the workshop of the manufacturing company, and then assembled at required site using steel, wood or metal structures. "Steel and metal ayout dominates wood in prefab houses as wood is costlier," says Nilmani Sapkota, technical director of Himalayan Prefab Pvt Ltd, adding that prefabricated houses are fast to install, look more elegant, easy to modify, environment friendly and affordable.

Advantages of prefabricated houses are many. They are affordable than regular homes as they can be completed in a few days which means less money spent on labour and construction costs. The cost depends on the layout of the house and the quality of material used. The cost of material ranges from Rs 950 to Rs 3,500 per square feet. Many organisations are opting for materials within the range of Rs 1,000 per square feet. The set up time depends upon the area, like installing a house on 500 square feet takes 10 to 15 days. According to Sapkota, all the interior work and most of the exterior work is completed before the structure is even set up. Wiring, plumbing of prefabricated houses is different than that of regular houses as the former needs special designs and software to carry out the task.

Adding to the list of benefits of prefabricated houses is that they are also environment friendly.
According to Padam Bahadur Shrestha, owner of Bira furniture, setting up a prefab house requires less use of heavy equipment and construction vehicles which release harmful smoke and fume into the air. In addition, fewer materials are wasted on pre-fabricated homes since manufacturing is carefully and precisely done. Moreover, those opting for prefab houses are free from problems of termite infestation and seepage of moisture.

"The concept of prefab house is novice for residential purpose, but they can be full size luxury house," says Sapkota, adding that people are not opting for residential as they feel it is not secure or durable enough.However, the mass majority is unaware that prefab houses are also designed to easily withstand earthquakes of eight rector scale and are even water and fire proof if expanded polystyrene (EPS) materials are consructively used.

According to Sapkota, the materials used for the construction vary from company to company but most popular materials used for roof and panel are EPS, polyurethane and rock wood panel. Similarly, aluminium allay frame with wall panel are mostly preffered for the door and UPVC for the windows. For ceiling, gypsum boards are generally used. Likewise, sliding doors and windows are mostly used in pre-fabricated houses, as they are easy to handle and relocate. If done by skilled workforce and with proper handling, pre-fabricated house can be relocated five to 10 times without damaging the structure.

The life span of prefab houses depend upon quality of material used but all houses have warranty of 15 to 35 years.
Pre-fabricated house can be up to three-storied. The materials used for prefab houses are imported from China and Germany.

source: The Himalayan Times

Booking open for 40 independent houses

CM Developers has opened booking for 40 independent houses in Vinayak Colony. Vinayak Colony is located at Bhainsepati, Lalitpur, just 2 km from ringroad.The colony offers a range of independent houses modifiable to reflect one’s individuality.According to the developers, first phase (120 Houses) of Vinayak Colony will be handover in Chaitra 2067.

Vinayak Colony showcases highly functional residences influenced by the minimalist western architecture giving them a suave contemporary look while the design itself is attuned to the local context.

Facilities:
> Swimming Pool
> Health Center
> Multi-purpose Hall
> Club with Restaurant
> Children's Play Area
> Many Pocket Lanscapes
> Round the clock security
> Fire Fighting System
> 24 hours treated Water Supply
> Generator Back-up Power for Common Facilities
> Cable TV

Apartments sell like hot cakes

Prestige Apartment, built by Prestige Developers Company, in Chandol, Kathmandu, has received an overwhelming response from customers. Of the total 46 apartments, 32 have already been sold out.

The apartments were constructed keeping in mind the risk of earthquake and other natural disasters in the Valley. Designed by Shah Associates, the Apartment is a residential complex built with neo-classical architecture approach. It has incorporated all the facilities required for an ultra-modern living. Special provisions have been made for fire safety, security, and mitigation of disasters such as earthquake and flood.

“We have tried to give the customers a feeling of their own home,” said Rameshwor Thapa, chairman of Prestige Developers, on Saturday at an interaction. Thapa said the company has left no stone unturned to make the apartments best in terms of quality through the use of modern technologies.

The apartments are priced at Rs 8,000 per square metre. “Starting price of the apartments is set at Rs 15 million,” said Sikhar Singh Shah, executive director of the company. Shah added that the company has been receiving a huge number of inquiries from potential buyers for the remaining 14 apartments.

The company is planning ready the apartments within next two months. It has given Simrik, Laligurans, Munal and Danfe names to the four blocks of the apartment.

Round the clock security, swimming pool, fitness centre, community hall, garden, playing area for children and 24-hour water and electricity supply are some of the features of the apartment. The company said hospital, shopping complex, educational institutions are also located close to the apartment. Ranjan Singh Shah, managing director of the Shah Associates, said they have adopted all the modern technologies available in the country to make the apartments earthquake resistant.

source: The Kathmandu Post:Money(2011),"Apartments sell like hot cakes",The Kathmandu Post, 23 Jan 2011,page 2

Testing times ahead for banks-borrowers in real estate sector hard to repay loans

With the first half of the current fiscal year already gone, the country’s banking system is facing multiple challenges—from liquidity constraint to potential risk of huge realty loan defaults. The second half is likely to be a testing time for the domestic financial sector.

The half-yearly results of banks show that there has been decline in the deposits of commercial banks in the last six months, but lending has increased. The decline in deposits and increment in lending has resulted in the drop in the presence of liquidity in the banking system.

The liquidity constraint has forced the central bank to inject liquidity through repo (central bank injecting fund in banks by purchasing their treasury bills). The central bank has already injected Rs 18 billion over the last two weeks in banks through repo to ease liquidity crisis.

The banking system had also faced liquidity crunch during the first half of last year. Though last year’s crunch was much severe than this year’s, bankers say the liquidity situation is still tight and they are finding it difficult to lend.

Deposits of commercial banks, in the first six months, declined to Rs 625 billion from Rs 631 billion at the end of the fiscal year 2009-10. However, their lending soared to Rs 500 billion from Rs 462.24 billion. This has resulted in increase in credit-to-deposit ratio, lessening the presence of liquidity in banks.

Current scenario of domestic banking sector, according to Sashin Joshi, president of Nepal Bankers’ Association, signals more challenges for banks in the second half of the fiscal year. “The actual picture can be seen after banks start unveiling their half yearly results. However, results do not seem to be bright,” said Joshi.

Decline in deposits, according to bankers, indicates the emergence of ‘informal economy’.

Currently, banks are taking loans from other banks (inter-bank lending) at more than 10 percent interest to ease their liquidity crunch. Although inter-bank lending rate has fallen from last week’s 12 percent, bankers say that the rate remaining stagnant at 10 percent is a sign of liquidity crisis.

According to bankers, tighter liquidity situation has made difficult for them to lend. The situation is such that some banks are postponing loan commitment dates for big clients. “We are postponing the dates due to tighter liquidity,” said Janardan Acharya, chief executive officer of Rastriya Banijya Bank (RBB).

The RBB witnessed its deposit increasing in the sixth month of the fiscal year after five consecutive months of decline. The increment in the sixth month, according to RBB’s Acharya, was due to the pensions worth Rs 2 billion reimbursed by the government. “It has eased our liquidity situation to some extent,” said Acharya.

Bankers say the liquidity satiation further tightened after the government issued bonds worth Rs 4 billion. “It resulted in the withdrawal of deposits from the banking system,” said a banker. “The government move was impractical, as it had enough resources to spend.”

According to the Nepal Rastra Bank (NRB) statistics, the government has Rs 29 billion in its treasury at the end of the first six months, which is historically highest during the period. If that amount was spent, banks’ liquidity situation would ease to some extent, as they would receive deposits.

A senior NRB official said the banking system faced the liquidity crunch, as they kept on lending despite stagnation in their deposits. “The central bank wants that banks lend rationally on the basis of deposit growth,” the NRB official said.

Bankers say banks’ profit would take a hit due to rise in the cost of fund and squeeze in the spread rate. In fact, symptoms are already visible, with banks’ net profit declining to Rs 3.46 billion in the first quarter of FY 2010-11 from Rs 3.80 billion in the same period last year. Joshi estimates that the spread rate has gone below 3 percent which was at 3.8 percent by the end of the last fiscal year.

Even the central bank officials say that banks profits this year will not be as high as those in earlier years. “Their profits may not go higher than last year’s figure, but will not drop significantly either,” said Maha Prasad Adhikari, deputy governor of the NRB.

With realty transactions coming down and price remaining stagnant, borrowers involved in real estate sector are finding it hard to repay bank loans. “There can be more realty loan defaults with slowdown in realty business,” said Joshi.

As banks are not renewing realty loans to reduce their lending in the realty sector to bring it down within the NRB set limit, borrowers are facing increased pressure to repay loans. Some bankers are now calling for some relaxation by the central bank in the provision on realty sector lending. “If relaxed, crisis in the banking can be resolved,” said a banker.

The central bank also admits that possibilities of defaults are high and NPA may go up. “The impact of speculative transactions may be seen this year,” said Adhikari.

source: The Kathmandu Post:Money (2011),"Testing times ahead for banks", The Kathmandu Post, 22 jan 2011, page 1

Apartment from Prestige Developers

Apartment from Prestige Developers located at Chandol, opposite to Kundalini Health Club, Kathmandu

Figure showing Revenue from Realty (in NRs. million from 2009 to 2010)

Realtors cut prices up to 30%

Real estate dealers, who long resisted selling pressure for fear of a downward price spiral, have started to cut prices in a bid to lure buyers and recoup possible investment at the earliest.

On Tuesday, Uddav Raj Bhattarai, chairman of Kapan Housing, placed an advertisement in a national daily offering to sell land at a lowered rate of Rs 350,000 per ana (342.25 square feet).

Just a couple of months ago, he had sold numerous plots of the same land at half a million rupees. "Not only that, I have slashed the rate of a 800 square feet stand-alone groundfloor house to Rs 5.5 million from Rs 6.5 million,” he informed Republica.

Laxmi Neupane, chairman of Manakamana Housing, has a similar story. He recently reduced prices of residential plots at Hattigaunda which he had developed, to Rs 800,000 per ana from Rs 1 million. Till a month ago, he was adamant he need not review the prices even though transactions had nosedived.

In general, real estate dealers have slashed prices by as much as 30 percent in Kathmandu, said realty experts. “Unfortunately, most of them are failing to lure buyers even at the lowered rates,” said Neupane.

As the realty market wore a deserted look, Raj Kumar Maharjan of Indreni Real Estate told Republica he is facing trouble managing cash even to pay his office rent whereas his monthly income was running at a million last year.

People like Maharjan who deal in property on loans taken from family and relatives, said they have no option but to lower the prices to recoup investment and settle dues. Dealers like Neupane, who are into real estate with loans from banks, said on the other hand that they have reached a point whereby they can no longer resist the heat. “After holding the price for almost a year, the pressure is now unbearable," he said.

Experts like Buddhi Narayan Shrestha, who is also an advisor to the Nepal Land and Housing Developers? Association (NLHDA), said land prices have not dropped at prime locations and in cases where the developers invested personal money.

“Otherwise, prices have invariably dropped in ranges of 20 to 30 percent in the outskirts of Kathmandu, 15 -25 percent in Lalitpur and 10 to 25 percent in Bhaktapur,” he said.

Still, most dealers preferred to maintain silence about their price cuts and selling spree; they fear it might spark a downward trajectory, something which could hit their investments hard.

Nepal?s real estate business has been jittery since January 2010, particularly after the central bank imposed a cap on the loan exposure of banks and financial institutions (BFIs) to the sector. The move was aimed at cooling the overheated market.

While the imposition of a capital gains tax and income disclosure on property transactions above Rs 3 million discouraged commercial buyers, rise in the lending rate that jumped from 9 percent to 17 percent amid the liquidity crunch also drove away buyers.

As a result, the five land revenue offices (LROs) in the capital valley, which used to be heavily crowded with service seekers, wear a deserted look at present.

“Our average daily transactions now number around 80. Last year, it used to be well over 250 and managing the rush used to give us a tough time,” said Hari Prasad Gauchan, an officer at Chabahil LRO.

Transactions at Dillibazar have dropped to 50 a day from well over 200, while transactions at Kalanki too have dipped to an average of 30 from last year?s daily average of 200. The situation at Bhaktapur and Lalitpur LROs is no different.

Owing to the dip, the government?s revenue collection from realty transactions in the month from mid-September to mid-October dropped to Rs 90.08 million. It had collected Rs 317.20 million in the same month last year.

Although NRB in September 2010 relaxed its cap on housing loan exposure, it continued to tighten real estate loans, including loans issued for land plotting and procurement.

“As the directive seeks BFIs to limit their realty portfolio to 10 percent of total loans by 2011/12, most of them have stopped renewing loans in the sector,” said Sudhir Khatri, chief executive of DCBL Bank. Some financial institutions are even seeking parties to repay as early as possible.

This has upped the selling pressure and some 75 percent of real estate dealers, who trade with loans and informally borrowed money, are under severe stress, said Shrestha, adding that he foresees many of them jumping into the selling current soon.

source:republica

Apartments from Prestige Developers

Prestige Developers Company has announced soft opening of its apartments on Jan 22, 2011. The apartments is located at Chandol, opposite to Kundalini Health Club, Kathmandu.According to the developers, very few units are available for sale.

Some of the features/highlights of Apartments:
> An Epitome of Pride and Luxury
> Truly World-class Project wit state of the art facilities
> Exceptional in Design and Execution of Project
> Ready to move in within 2 months

Cement output hurt by slowdown

Though there are around three dozen cement industries in Nepal, the country has to import around 40 per cent cement to meet the domestic demand.

“Some 29 already established big cement industries with installed capacity of around 12,700-tonne per day can supply only around 60 per cent of the demand,” said Jayandra Chudal, executive director of the Bishal Cement. Bishal Cement is a Rs 500-million close-circuit plant planning to start production by this April.

Last year, when the country witnessed a construction boom, cement industry emerged as a new investment avenue. The Central Bureau of Statistics has predicted an increase in the contribution of construction sector to 6.62 per cent to the gross domestic product (GDP) in the last fiscal year, compared to a fiscal year ago, due to increase in construction materials, government and private sector construction activities.

“However, there is a slowdown this year,” he said, adding that the companies are now producing half of their installed capacity due to slowdown in the construction business.

“If all the companies that are under construction come into operation, the total production capacity will reach above 16,000 tonne a day, excluding the industries that have 100 tonne and less capacity,” Chudal said.

Of the 29, seven are mine-based cement industries, including government owned Hetauda Cement and Udayapur Cement, and others include Maruti Cement, Butwal Cement, Supreme Cement, and Dynasty Cement that have Integrated Unit (IU).

Some new industries like Shivam Cement, Ghorahi Cement, Sonapur Cement, Rolpa Cement that are under construction are also mine-based that use the lime stone mines to produce clinker for the cement.

Due to more mine based industries, the contribution of mines to the GDP is also predicted to be 4.23 per cent from a fiscal year ago.

The government in its budget for the current fiscal year has announced to give higher priority to the completion of roads and electricity transmission lines for upcoming cement industries in Udayapur, Makawanpur, Dhading, Rolpa, and Dang.

The cement industries are upbeat. “The local cement industries’ could be encouraged, if only local housing and hydropower companies start using local cement coupled with government incentives,” Chudal said.

The government has also promised to provide benefit of direct purchase of diesel form Nepal Oil Corporation at dealer’s price, in quantity exceeding at least one tanker at a time, for industrial and commercial uses for the manufacturing industries in view of power outage that has hurt the industries.

“Consumer awareness about the quality of cement is as important as power supply to keep productions on track,” he added.

source: Chailse, Kuvera (2011),"Cement output hurt by slowdown",The Himalayan Times, 20 Jan 2011
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Commercial complex construction booming

Construction of commercial complexes in core city areas of Kathmandu has surged of late. With the Capital’s major business areas getting crowded by the day, multi-storied business complexes have indeed become a necessity.

Civil Group is constructing Civil Trade Centre at Sundhara with an investment of over Rs 800 million. The trade centre was completely booked in a single day. The 10-storied trade centre will have 146 shops in its ground to fifth floor. Its seventh, eighth and ninth floors will be leased to offices, according to the developer.

Kathmandu’s major business hub, New Road, is also getting one more commercial complex—Ranjana Trade Centre. Like the Civil Trade Centre, Ranjana was also booked in a single day. Developers said Ranjana will feature facilities including food court, kids’ zone and mini multiplex, among others.

The Durbarmarg area, which is rapidly being developed as a financial area, will see JSB Financial Tower soon. Developed by Krishi Premura Properties, the 16-storey Tower will be the tallest commercial building in the Capital. Besides this, one more mall is under construction in the Durbarmarg area.

The tourist hub of Thamel is also getting a mall- The Thamel Plaza-in the near future.

Likewise, Star Mall at Putalisadak is being operational within a month. The seven storied building will have 50 stores and meeting and conference halls in its third floor. It will also have a food-court and cinema halls in the fourth floor. The fifth, sixth and seventh floors will be leased to offices. Star Holdings, the developer of the mall, has invested around Rs 750 million for its construction.

Aayusha Developers is planning to build CM Central Market at Naxal. Like most of the malls, CM Central Market will also feature a food court and multiplex. One more mall is in the offing at New Baneshwor.

Builders are developing new commercial complexes with various facilities such as elevators, escalators, food-courts, gaming zones, seminar halls and multiplexes, among others.

The Maitighar-Koteshwor segment is also witnessing construction of several business complexes. Kathmandu Municipality, which declared this segment as a commercial zone, has approved the construction of 14 corporate buildings here. Of the 14 projects, two are under way.

Six insurance companies have invested more then Rs 420 million in the construction of corporate buildings in the Capital. Asian, Shikhar, Sagarmatha, Premier, Siddhartha and Alliance Insurance companies are investing hefty sums in the construction and purchase of corporate buildings.

source: The Kathmandu Post (2011),"Commercial complex construction booming",The Kathmandu Post, 20 Jan 2011

Land Reform Dept mum on public lands misuse data

Despite repeated requests by the Ministry of Land Reform and Management (MoLRM), the Department of Land Reform and Management (DoLRM) has failed to submit within the stipulated timeframes data on public land encroachment in Kathmandu Valley.

“We sent the department three letters asking officials to furnish exact figures on public land encroached in Kathmandu Valley over a period of 15 years,” said Lal Mani Joshi, joint secretary at the ministry, adding, “But the department didn´t comply with our request.”

According to him, the ministry has once again written to the department to furnish such a report by Friday. “We have asked department officials to submit the report by this Friday at any cost,” Joshi informed Republica.

The ministry has sought details of misappropirated public lands from the department. “The department is asked to furnish details as to how much public land was illicitly transferred to the names of individuals and when,” reads the letter sent to the department by the ministry.

The ministry had issued a serious missive to the department after the Office of Prime Minister and Council of Ministers (PMO) instructed the ministry to immediately control the racket in public land and identify who has seized how much public land.

According to a report prepared by the Rawal Commission in 2052 BS, Kathamandu Valley possesses altogether 18,000 ropani of public land. In an in-depth report to the government, the commission had concluded that 1,800 ropani was misappropriated by hundreds of individuals.

No investigation was carried out regarding public land misuse in the Valley after 2052 BS.

However, government officials have estimated that 10 times more public land could have been seized by individuals over the 15-year period as the trend of transferring public lands into private ownership had gone up sharply.

According to a knowledgeable source at MoLRM, department officials failed to submit their report at the ministry even after three deadlines mainly for three reasons. First, they themselves might have been involved in illicitly transferring public lands to the names of private individuals. Secondly, collecting reliable figures on how much public land was misappropriated and by whom is a complicated task as there is no record keeping system in government offices. And thirdly, department officials might have deliberately ignored the ministry´s request as collecting such data is less beneficial to them compared to some other lucrative activities within the department.

Despite Republica´s efforts, DoLRM Director General Jeet Bahadur Thapa was not available for comment as to why the department could not furnish the report. 
source:Gautam, Bimal(2011),"Land Reform Dept mum on public lands misuse data",republica, 20 Jan 2011

Realty slump deepens across the country

Overheated real estate market in major cities, including the Kathmandu Valley, have shown first signs of turmoil, deepening anxiety of speculative investors and adding worries to the financial institutions that issued huge loans to the sector.

In the Valley, transactions dropped by 60 percent over mid-December 2010 to mid-January 2011 (sixth month of the current fiscal year), compared to the same period last year, according to the data of Department of Land Reforms and Management (DoLRM).

The prices too have dropped by around 30 percent during the period, said Suman Neupane, a property developer.

The situation is still worse in cities like Pokhara, Butwal and Bhairahawa, among others, where asset bubble had started to swell later than the Valley.

For instance, statistics of Land Revenue Office (LRO), Kaski, shows that land transactions in Pokhara, the major real estate hot-spot, have dropped by as much as 71 percent over the second quarter of this fiscal year, ending mid-January 2011, compared to same period last year. The slump has also caused the prices there to drop to half of the past, according to our correspondent Manoj Adhikari.

Previously, land dealers used to trade land at Rs 100,000 per 75 square foot in Pokhara. Now they have dropped the price to Rs 50,000 per 75 square foot.

Land and housing prices in Pokhara had jumped 15-fold over the span of two years till mid-January 2010. However, leading developers said they have started to dispose plots at half price, as rising lending rates threatened to jack up interest liability sharply.

“With banks and financial institutions tightening issue of fresh loans and gearing up recovery of past loans, we see no signs of market bouncing back soon,” said a developer, adding that it was wise to sell the plots now than later.

As a result, LRO Kaski recorded transactions of just 5,108 units of plots during the second quarter of this fiscal year. The office had recorded transactions of 12,089 residential plots during the same period last year. “The transactions had enabled us collect Rs 146.46 million in revenue, 71 percent higher than what we have managed to collect this year,” said Rishi Ram Lamichhane, registration chief at the office.

In Butwal too, the market has slumped so badly that one Netra Bhattarai, a resident of Kalikanagar -11, who earlier refused to sell his land plot at Rs 300,000 per 75 square feet, is searching buyers to sell it at just Rs 100,000.

“Unfortunately, I am not finding any buyer even at such reduced rates,” he told Republica.

Our Butwal correspondent Sher Bahadur KC reported that land and housing transactions in Butwal and Bhairahawa -- the mid-western trading hubs -- have dropped to half and the prices too have come down by as much as 75 percent.

Local property developers said the slump had badly hurt their capacity to repay loans. Tara Bista, an entrepreneur, said that developers are on a selling spree, cutting prices in a bid to recoup their investments and clear bank loans.

Records of LRO in Chitwan and Makawanpur too show that realty transactions there have shrunk by as much as 35 percent over the past year. However, property prices there have dropped only nominally, compared to other districts.

DoLRM data shows that transactions have slowed in Dang as well. Our correspondent in Nepalgunj, however, reported that land transactions there have inched up, as banks and financial institutions (BFIs) continue to issue loans to the sector, but under different headings.

The transactions have slowed in Biratnagar -- the eastern trading hub - as well.

Realty boom had stretched out of the Kathmandu Valley, inflating asset bubble in cities like Pokhara, Butwal, Dang, Bharatpur, Hetauda, Biratnagar, Dharan and Itahari some two years ago, as BFIs invested in the sector aggressively. But it has started to take corrective course, thanks to Nepal Rastra Bank´s intervention into the market, which came in the form of cap on BFIs loans exposure to the sector a year ago.

The slump, however, has turned the BFIs, mainly financial institutions anxious, as their loans portfolio in the sector is huge, and crash of market could bloat their non-performing assets and non-banking assets, hurting their financial health severely.

source: Sharma, Milan Mani (2011),"Realty slump deepens across the country ", republica, 19 Jan 2011

Star Mall starting operation in a month

Star Mall at Putalisadak is all set to start operation within a month. The seven-storied mall promoted by Star Holding will have spaces for offices, shops, restaurants, food court and cinema hall, among others.

Surav Shrestha, director of Star Holding, told Republica that they have already received booking for about 60 percent of the spaces.
“We are receiving encouraging response. We will come into full operation very soon,” he added.

The mall had opened booking about a couple of months ago. Price of spaces at the mall ranges from Rs 150-200 per square foot.

Built by Sharma & Company, the new mall in the town promises to provide its customers a shopping experience of international standards. Shrestha further said tenants at the mall will get to enjoy attractive privileges and facilities.

“Star Mall will be different from existing malls in the town. We hope to develop Putalisadak area into a shopping hub,” Shrestha added.

The mall will have all modern amenities like 24-hour security, round the clock power back-up similar to that of star hotels, parking in two-floor basement, passenger lifts and central air conditioning, among others.

“There will be three multiplexes with total capacity of 600 seats, six meeting rooms with a maximum of 25 seats each and two conference halls with 200 seats each,” Shrestha said, adding that the mall will also have Wi-Fi facility.

The mall will have shops featuring leading brands on three floors and each floor features a particular lifestyle products. There will be shops in ground floor, first floor and second floor; meeting halls on the third floor; and central food court and multiplexes on the fourth floor. There will be office spaces on the remaining floors.

“The ground floor will feature a wide range of accessories from international brands, while the first floor will include international as well as local premium brands,” Shrestha said, adding that the second floor will be devoted to electronic products.

The mall has been built at a total investment of Rs 750 million.

source: republica(2011),"Star Mall starting operation in a month ",republica, 17 jan 2011

Real estate poses systemic risk

Ashoke SJB Rana is the chief executive officer of Himalayan Bank Limited. Himalayan Bank, one of the oldest private sector banks in the country, is celebrating its 19th anniversary this week. The Kathmandu Post talked with Rana about the bank’s achievements over the period and challenges facing the banking sector. Experts:

Himalayan Bank is celebrating its 19th anniversary this week. What are the achievements of the bank over the period?
We have been providing 30-40 percent dividends to our shareholders every year. We provided 11 percent cash dividend and 25 percent bonus shares in fiscal year 2009-10. We are pioneer in introducing credit cards and SMS banking in Nepal. We have invested heavily in world class technologies to ensure our customers’ easy access to banking service. We invested in people (human resources), process (accessibility) and technology. We invest more than 6 million for training of human resources every year.

We have one of the biggest depositors’ bases with active account of more than 200,000. We are one of the banks having biggest corporate clients. However, for the last three years, we are focusing on small and medium enterprises (SMEs). While lending to SMEs, we are also training them on maintaining accounts. We have currently 15 percent loan portfolio in SME sector and we plan to increase it to 25 percent within 2012.

Liquidity crunch has continued this year too. How will it affect banks’ profit?
Banks are facing accute liquidity pressure as deposits have not gone up. It is reflected by the over 12 percent interest rate on inter-bank lending. About half of the amount of total deposits of commercial banks has been stuck in the realty sector. We hope that the situation will ease after the government expenditure picks up momentum. The government recently issued bonds worth 4 billion and this also contributed to the exit of deposits from banks. In case of HBL, our profit has gone up by 17 percent over the last six months. This was possible after we recovered bad loans.

How risky is the real estate sector, given that the sector is facing recession?
Those banks having huge lending to real estate may face difficulties in recovering loans by April. Banks have invested around Rs 124 billion in the realty sector. On the other hand, banks’ investments of around Rs 6 billion in crusher industries are also at risk due to government’s ban on the export of sand and boulders. Real estate and crusher industries pose systemic risk.

Banks have started increasing lending rate after the Nepal Rastra Bank issued guidelines on service charge. How is HBL reacting?
We also had to increase the interest rate on lending, as our cost went up by Rs 130 million while adjusting interest rates on saving accounts. We have now offered 5 percent interest on general saving accounts and 7 percent on special ones. We had to increase interest rates on general saving accounts by 1.25 percent. That’s why interest rate on trust recipient loans went up to 12 percent in January 2011 from 11.5 percent in December.

Do you see any possibilities of bank mergers in 2011?
Mergers and acquisitions are new areas for the banking sector. The biggest hurdle is the promoters’ share. Promoters should be ready to go for merger if their shares are valued equal to public shares. There should not be division between promoters’ shares and public shares after the locking period of five years. Finance Secretary had once assured that the government would reduce the corporate tax for banks to 25 percent from existing 30 percent if they go for merger. The budget for the current fiscal year could not incorporate such provision. If the government and NRB give some incentives for merger, it will encourage mergers. Merger is not an easy task. Management of employees will be a tough challenge because the staff leaving the merged bank should be compensated.

Nepal Rastra Bank is preparing for the mid-term review of the monitory policy. In your point of view, what are the issues that the central bank should address while reviewing?
The NRB imposed cap on real estate sector. The government has discouraged the import of gold due to deficit in balance of payment. Now, people have little investment options. In this situation, if the central bank provides some relaxation in the capital market, people can have an area to invest in. The NRB can exempt the provision that investors should pay 25 percent of the loan taken for purchasing shares while renewing such loans. Banks, which are curresntly facing liquidity crunch, may feel some relief if the central bank reduced the cash reserve ratio and decides to deposit government’s resources in commercial banks.

source: The Kathmandu Post: Money(2011),"Real estate poses systemic risk",The Kathmandu Post, 19 Jan 2011, p.3

Impending financial disaster

Nepal has been struggling to maintain macroeconomic balance for a couple of years now. Low growth rate, high unemployment, balance of payments deficit, widening trade deficit, and high and sticky inflation are some of our pressing existing macroeconomic challenges. Now, add to that list an impending financial disaster, engendered largely by the bank and financial institutions (BFIs) themselves and to some extent by Nepal Rastra Bank (NRB), our central bank.

While the latter ignored the unhealthy development in financial sector, let new BFIs prop up without even evaluating if our economy needs so many of them, and took damage control measures of late, the former is in desperation to survive amidst cutthroat competition, which is getting nasty by the day. The BFIs’ inability to effectively cope with the existing pressure on deposit and lending, and to attain unsustainable profit targets might lead to a situation where all profits are private but losses are social, i e taxpayers pay the cost of reckless behavior of few sectors in the economy.

Looking at the existing business structure of the real estate and housing sector and the BFIs, it is very likely that their unjustified growth will end soon, raising fear of destabilizing not only the very conduit from where the public is facilitated with credit but also derailing the entire economy. The existing path on which these two sectors are hurtling toward bears the hallmark of the recent housing, financial, and economic crises in the West. It all starts with pumping of too much money in one sector that, after a few years of unnatural and unsustainable growth, crashes down and puts pressure on the BFIs, leading to defaults, extremely vulnerable financial institutions, and squeezing of credit to all sectors in general.

Before going into detail about symptoms of the impending financial disaster, let me first discuss how the bigwigs of the BFIs are behaving irresponsibly and are trying to scuttle reforms introduced, albeit lately, by the NRB.

Recently, they made a high pitch about the central bank being anti-market when it regulated CEO’s pay; capped lending to the realty and housing sector; and directed the banks to ensure that interest rate difference on various kinds of savings accounts should not be more than two percentage points. The negative and nonsense drumbeating by the bigwigs of the banking sector was so incriminating that the central bank governor Dr Yuba Raj Khatiwada felt compelled to make a statement that he and the NRB are not market unfriendly.

Ironically, the very next day the executives tacitly agreed to cap savings account interests between 4-6 percent. Without shame, the Nepal Bankers’ Association (NBA) argued that the banking bigwigs reached “a gentleman’s agreement” to cap interest rates. The same executives who were defending free market colluded to cap interests on savings accounts. This is carteling and an outright hypocrisy. They played the same anti-market game in May 2010 when they colluded to limit interest rate on fixed deposits at 12 percent. The main problem is not financial regulation; it is that we simply have way too many BFIs serving a narrow depositor and borrower base.

Behind the unnecessary activism of the banking sector in pressing their demand, resisting regulation, and trying to circumvent the NRB’s directives lies a bitter truth: Some of the BFIs very existence is at stake. They are trying to buy time before the inevitable disaster hits them. This is largely of their own making by imprudently running after short-term gains over long-term sustainability. The crux of the matter lies at the reckless lending to the urban-centric real estate and housing sector, which is starting to tumble after a few years of rapid growth.

First, lending to this sector is unjustified by future growth prospects. This urban-centric sector contributes around 7.8 percent of our GDP and is the highest growing sector in the past six years. Buoyed by easy finance and loans, real estate transactions and housing complexes are rising rapidly. Sometimes artificial demand is created just to jack up prices. This is evident from the fact that our shaky economic fundamentals do not justify multifold increase in land prices in a matter of days. Moreover, liquidity is pumped into this sector without properly assessing risks and the ability of borrowers to repay loans. The BFIs are hardly distinguishing between normal and subprime markets.

This is creating market disequilibrium, i e the supply of real estate and housing complexes is outstripping demand, leading to a decline in prices. The media reports indicate that real estate prices have already gone down by 30 percent. Be prepared to brace for even lower prices. As prices dip, borrowers will be unable to honor principal and interest payments on time, forcing the BFIs to restructure loans and variably increase lending rates. Buyers will cancel booking even after paying the minimum required down payment. Soon we will see ‘ghost’ apartments, i e empty apartments waiting for customers to either buy or rent them. This will ultimately hit the BFIs.

Second, the uber-generous BFIs are chasing after short-term gains without properly assessing borrowers’ ability to repay interest and principal on time. As of November 2010, credit flow of commercial banks to land and buildings sector was Rs 284 billion out of a total of Rs 415 billion, representing about 69 percent of total credit flows with assets guarantee. Since a lot of this credit went to the real estate and housing sector, which is facing a hard time due to declining prices, the vulnerability of BFIs to an ultimate busting of this sector is pretty high.

Now, you might be wondering why the BFIs are lending so much to just one sector. Well, the reason is that the rapid increase in number of BFIs without a proportional increase in depositor base intensified cutthroat competition to attract both depositors and borrowers, and put the BFIs in desperation to meet unsustainable profit targets. Despite knowing the fact that the incredulous profit targets can only be achieved in the short term by putting the foundation of the entire banking sector at risk in the long term, the BFIs played the risky game (by lending too much to one sector) as if everything is normal.

Still, BFIs are offering interest rates above 12 percent in savings account. In June 2010 and July 2004 it was just above 7.7 percent and 5 percent, respectively. Meanwhile, the maximum lending rate has been over 18 percent. In June 2010 and July 2004, it was 14 percent and 11.5 percent, respectively. Due to limited playing field and increasing competition, some of the banks are even offering high interest on a daily basis on demand deposits, which usually does not happen. Since this is unsustainable and is putting the entire financial sector at risk, the central bank capped lending to overly heated sectors and interests differential in deposits. To circumvent this decision, the BIFs are capping interests on saving accounts and are variably increasing lending rates without properly informing borrowers. It will increase changes of more defaults.

The development in the housing and real estate sector and the ad hoc decisions of the BFIs do not augur well for the economy. We might end up with empty apartments and ‘ghost’ houses if things continue to go the way they are going right now. Playing with interest rates on loans and savings is just an attempt to buy time before the inevitable disaster hits the BFIs. It is good to acknowledge and rectify mistakes before it is too late.

The tendency to seek short-term gains over long-term sustainability is a recipe for disaster with severe negative externalities, i e it will not only affect the BFIs, but also the public who are not a direct party to the activities of financial sector, and real estate and housing sector. Before these two sectors put the entire economy at risk, strong safeguards should be put in place. It might mean making painful decision of letting some BFIs to either fail (remember Nepal Development Bank?) or forced to merge, and help to rapidly cool down the urban-centric real estate and housing sector.

source: Sapkota, Chandan (2011),"Impending financial disaster ",republica, 15 Jan 2011

Elegent option for doors and windows

Previously, people considered wood to be the only material that could be used for windows and doors but today there are other options available in the market, with aluminium being the popular choice of many. Supertech Pvt Ltd, established in 1989, is believed to be the pioneer in Nepal to introduce aluminium materials for building houses. Currently, this company is not in operation but there are several others that have begun to offer these products and services.

"Earlier, wood was the first choice for doors, windows and frames in building, but with rapid deforestation, wood has now become costlier and is fast depleting. Instead of wood, many people are now opting for aluminium. In addition to ecofriendliness, this unique material has its own style, is aesthetically functional and suitable for any kind of building," says Ravi Khetan, owner of Doors `N' Windows Pvt Ltd. He adds that aluminium windows do not fade like wooden ones and therefore require less maintenance and paint jobs. Established in 2001, the company has exhibited its work in a number of prestigious business complexes like Lucky Tower in Tripureshwor, City Centre in Kamalpokhari, Himalayan Bank in Kamaladi and Saakha Centre in Hattisar.

Aluminum windows and doors come in different types, which give the owner the option to choose from a large variety of colours, styles and designs. Windows are available in sliding, casement, structural glazing, bay and arch models while doors can be either swing, hinge, sliding or bi-folding.

According to Madan Manandhar, managing director of Nu-Tech Pvt Ltd, business houses prefer structural glazing windows and swing doors, whereas sliding windows and hinge doors are more popular for residences. The specimens of this firm's work can be seen in Manipal Hospital in Pokhara, Nepalgunj Medical Hospital in Kohalpur and Mechi Hospital in Jhapa.

Depending on the quality, aluminium can cost from Rs 200 to Rs 800 per square feet. A normal sized alu minium window (4 X 6 sq ft) costs approxi mately Rs 6,700 without fly screen and Rs 8,000 with fly screen. Similarly, normal sized aluminium doors (3 X 7 sq ft) cost around Rs 8,400 to be set up.
For aluminium windows and doors, plain glass is preferred instead of black glass.

The installation time depends on the amount of space to be covered but it takes much lesser time as compared to wood and is certainly more hassle free.
Grills can also be part of the aluminium windows. "Many people are not aware of this fact, but grills can be easily installed in them," says Manandhar.

"Aluminium windows and doors are architecturally versatile, so they maintain consistent sight lines and enhance any room with their simplistic and unfussy form.
The advantage of installing aluminium doors and windows is that they protect the house from external agents like light and water and do not rust or become damaged even under extreme conditions. Therefore, aluminium fulfils a dual purpose, as it is both protective and decorative in nature," adds Manandhar.
Besides these advantages, it also allows space and ease in moving panels. This creates a feeling of openness and allows the spaces to merge together seamlessly.

Additionally, aluminium windows and doors have tight framed enhancements, which make it more secure. While aluminium is available in Nepal, it is also imported from Thailand and China. Customers mostly opt for Chinese assemble, as these are most affordable.

source:Pathak, Prakiti (2011),"Elegent option for doors and windows", The Himalayan Times: Property Plus, 15 Jan 2011

Nepalese securities market need to attract real sector companies

The corporate governance is conventionally regarded as applicable in the domain of public corporations and family firms have long been excluded from the good governance debate However, the fact that only 15 per cent of family-owned businesses survive until the third generation indicates that governance is also a crucial issue for family businesses.

What causes family firms to fail the test of time?

Families are no different than any other institutions, even countries. They require values, codes of justice, fair play, and support for the weaker members of the family. They require a mechanism for redressing grievances and having open and candid discussions.

Briefly, problems within a business family can be summarized as: Very few families understand that their assets comprise three forms of capital: human, intellectual, and financial. Even fewer families understand that without preservation of their human and intellectual capital, they cannot preserve their financial capital; unfortunately, families often concentrate solely on financial capital. Many families fail to understand that preserving wealth is a dynamic process. Each generation must maintain the wealth-generating spirit of the first founding generation.

Families often fail to measure properly the time frame for successful wealth creation. Planning the use of the family’s human and intellectual capital is too focused on the short term and on individuals rather than wealth creation mechanisms. The lifespan for a family business should instead be measured by generations, and long-term planning is essential. Families must also understand that fundamental issues of wealth preservation and good governance are qualitative, not quantitative. Most families measure success based on the size of their financial balance sheets. But, without a qualitative assessment of human and intellectual capital, the family balance sheet is incomplete and ineffective in measuring whether a family is achieving its wealth preservation goals. Family wealth includes human behavior, teamwork, and understanding

There is a growing need of a reform package in the form of fiscal, monetary and other measures to bring the real sector companies including the manufacturing, hydropower, trading, etc into the Nepal’s securities market.

The real sector having private and family owned ownership should be provided the opportunity through tax holidays and exemptions as attractions. Recently, the financial sectors hold about 90 per cent share of the number of listed companies and the transactions held. Out of 172 listed companies with NEPSE, about 150 companies constitute the financial sector. The real sector should follow the financial sector but in NEPSE it is the opposite

The real sector companies have a prime role for the uniform and sustainable development of a country and capital market as well. But, Nepalese capital market is highly concentrated on the banking and financial sector companies and the number of actively traded real sector companies is very low. The operating process and decision making process of industrial and production sectors companies in Nepal are still not very transparent. To convert private companies to public limited and make them transparent, and list themselves at the stock exchange, they should be provided income tax exemption up to 2%-3%. Moreover, if they can be classified as Group “A” companies at stock exchange then such tax exemption should be 5%. A provision should be made for public companies to get loans at lower rate (at least 1% lower) than others. Public companies should be awarded which implement the best standard of accounting and auditing principles. The recent provision by the SEBON regarding the IPO requirements of 15 per cent will provide some headway in this direction.

The objective of a system of family governance must be to align the aspirations of each individual family member with the goals of the family as a whole. Enhancing synergies between individual and family objectives encourages the long-term preservation of the family’s wealth: its human, intellectual, and financial capital.

A family’s wealth consists primarily of human and intellectual capital; financial capital is secondary. Financial capital alone cannot provide long-term wealth preservation. What a family’s financial capital can provide is a means to promote the growth of its human and intellectual capital. Without intellectual capital, even with all the money in the world, under-educated family members will not make optimal decisions. Therefore, the development of human and intellectual capital contributes to growth of financial capital.

An explicit and voluntary statement of the family’s values and goals is necessary to create a system of governance through which those family principles can be practiced. It ultimately allows for more effective wealth preservation. Each successive generation must reaffirm its commitment to this system of governance, including a process for settling family disputes.

Singh is CEO, NEPSE

source: The Himalayan times (2010),"Nepalese securities market Need to attract real sector companies ",The Himalayan times, 25 October 2010

Furniture shopping at its best

The whole concept of interior design has changed. It is no longer just about ar ranging a few pieces furniture in the different corners of a room. The idea today is to have a theme and furniture that goes with it. And this has brought about a revolution in the business of furniture and home accessories.

Maitighar gives you easy and the best options while doing your furniture shopping.Three huge furniture stores -Funiture 2000 Pvt Ltd (Fusion), Homemaker and Furniture Land makes this place the best place for furniture shopping.Quality & varieties Homemaker and Furniture 2000 have Nepal-made products, while Furniture Land supplies imported furniture.

Sudeep Manandhar, General Manager of Fusion store said, "Most of our furniture are made from particle board. It is not wood but made of wood particles like saw dust. These kinds of furniture are attractive and cheaper than wood."

He informed such furniture are portable as they can be dismantled into pieces and re-assembled. The hinges and nails used are from Germany "with life time warranty".

But if you are looking for furniture of pure wood, then head to Homemaker, where the furniture is made local wood like pine and gulmohar. Keshav Maharjan, General Manager of Homemaker said, "We have quality products. The finishing of our products, out customer service and warranty products make us different."

The dominant design is Japanese which can be classified as semi-modern and semi-classical.

Right next to Homemaker, Furniture Land provides furniture imported from China, Vietnam and Thailand. Madan Joshi, MD of the store said, "We focus on quality and bring in cost-effective products."

He added, "People look for exclusive designs these days.
The demand has changed and so we have cheaper and durable Chinese furniture with a contemporary look."

A few products are made of solid wood while the rest are made of compact wood.
Furniture solutions "We are a complete store for office furniture and we want to give them at the best price," said Manandhar of Fusion. He added that sofas from Singapore, made of leather and wood are one of the popular items here. Conference chairs and tables, executive chairs and tables and a few fancy chairs are other items to look for in fusion. These have been imported from Malaysia. The pricing is above Rs 3,500 it de pends on the designs.

While at Homemaker you can look for beds, dressing ta bles, varieties of shelves, ta bles, wardrobes and display cabinets. And here the price ranges from Rs 1,000 for show pieces to Rs 70,000 for beds and wardrobes.

The four floors at Furniture Land houses office tables and chairs, sunlight chairs, swing, wardrobe, bed, dressing tables to name a few. Here one can also buy pieces in sets like sofa and bed, or dressing table and wardrobe; these could cost more than two lakhs. Joshi informed that the fitting and locking of the furniture are done in Nepal.
Services offered At fusion customers can give an order for any design according to the dimensions of a room. Manandhar said, "From measuring the office spaces to making the furniture to interior designing, fusion provides a total service package."

Meeting the customers' demands, Homemaker also provides interior designing service. The store also has like lamps and crockery, plates from China, bed sheets and covers from India. Maharjan informed that they sell show pieces made of ceramic and said ,"We are promoting handicraft showpieces."

Furniture Land also sells show pieces and flower vases which look metal-like but are actually plastic ceramic. They also have bed covers, cushion covers. "In the scarcity of wood, we sell products that are not pure wood. We also provide information about the maintenance of furniture during the delivery, which is free if the destination is within the Valley," informed Joshi.

source: Rai, Jessica (2010),"Furniture shopping at its best", The Himalaya Times, 26 December 2010

Crystral city embraces Green Building concept

Crystal City Developers in Tahachal has launched an environment friendly concept -- green building -- for the first time in Nepal.

Under this, constructions are certified by Leadership in Energy and Environmental Design (LEED)-- an international certification system that ensures environment-friendly design in buildings.

"Green Building is the practice of constructing in such a way that is environmentally respondsible and resource-efficient throughout a building's life-cycle: from sitting to design, construction, operation, maintenance, renovation and demolition", informed Tejendra Nath Shrestha, managing director of the company.

Crystal City, which is an apartment cum shopping complex being constructed by Crystal City Developers, emphasizes taking advantage from renewable resources like sunlight, wind energy and photovoltic techniques and aims to design buildings in a such a way that have no adverse impact on the environment. The 16-storey building that will be constructed with a total investment of Rs. 2 billion will have shopping complex til the third floor, buffer zone on the fourth floor and the remaining floors will have 75 residential apartments.

"The Crystal City Developers project will be monitored in seven categories: site sustainability, water efficiency and water use reduction, reduction in energy use and use of renewable energy resources, reusing materials, indoor environmental quality, and innovation in design and regional priority in building,"informed Bibhuti Man Singh, senior architect and proprietor of Technical Interface who is looking after the project.

source: Bhuju, Kriti(2011)," Crystral city embraces 'Green Building' concept",republica, 1 Jan 2011

Banks lend 20 pc of their loan portfolio to realty

 Commercial banks lent Rs 98.2 billion to the realty sector including both housing and land in the first quarter of the current fiscal year. This is 20 percent of the banks’ total loan portfolio that stands at Rs 481.91 billion in the first three months.

The central bank has categorised real state loans into four categories—residential real estate loan, business complex and residential apartment construction loan, income generating commercial complex loan and other real estate loans (loans for land purchase).

Banks have the highest loan exposure to land purchase (other real estate loan), with Rs 46.39 billion. Loans that went to residential real estate stood second with the exposure of Rs 35.65 billion, followed by Rs 13.31 billion that went to complex and residential apartment construction. Banks’ credit that went to the income generating commercial complexes stood at Rs 2.9 billion.

The monetary policy for the current fiscal year has sought that the banks and financial institutions (BFIs) bring down their lending to lands to 10 percent and housing to 25 percent.

Currently, banks’ loan exposure to lands stands at 9.62 percent. It means they are not in a position to expand loans in this sector. However, they have ample of space to enlarge their investment in housing sector, as their loan exposure to this sector stands at 10.76 percent only.

With a view to diverting realty loans to housing from lands, the Nepal Rastra Bank (NRB), through the monetary policy, had reversed the earlier policy of giving banks more space for lending to lands than the housing sector.

Following the strict measure put in place by NRB, realty transactions have continued to drop, especially in Kathmandu. Revenue collection from realty transactions at five Land Revenue Offices (LROs) in the Kathmandu Valley went down by 58.28 percent in the first five months of the current fiscal year compared to that in the same period last fiscal. LROs collected Rs 641.53 million as registration taxes, against Rs 1.53 billion last year.

Nepal Bankers’ Association President Sashin Joshi said given the slump in realty transactions, banks are facing a tough time in recovering realty loans.

“Those who took loans to buy land thinking that land prices may increase in future may not be able to repay,” he said. Joshi, however, said the banking system is not at high risk, as the size of the loan that went to lands is not so big.
source: The Kathmandu Post: Money (2011),"Banks lend 20 pc of their loan portfolio to realty", The Kathmandu Post,10 Jan 2011

Raw steel is nation largest import-Real estate growth fueling demand

Then nation had imported iron and steel worth Rs 33.89 billion and petroleum products worth Rs 55.66 billion in 2009/10.

The big rise in imports of iron and steel was recorded at a time when the growth of real estate sector - the major consumers of iron products such as iron wire and rods - has been slowing for the last one year due to tightening of loan flow on realty sector.

Imports of petroleum products, which covered more than 15 percent worth of the total imports, dropped by 6.8 percent to Rs 17.85 billion during the first four months compared to Rs 19.17 billion during the corresponding period last year.

Similarly, import of gold - the nation´s largest import during the first four months of last fiscal year with the import volume touching Rs 19.26 million -- dropped by more than 14 times to Rs 1.33 billion, thanks to the government´s tight import policy. Nepal had imported gold worth Rs 41.45 billion in 2009/10.

Commenting on the whopping rise in import of iron and steel, rolling mills operators said producers might be preparing themselves to maintain supplies during peak construction season that begins from mid-January. “Keeping in view the long load-shedding hours in coming months, rolling mills might have imported large volume of iron and steel in the previous months to maintain adequate stock of raw materials,” Sahil Agrawal, promoter of Jagadamba Steels told Republica on Sunday.

A total of 22 rolling mills are presently in operation in different parts of the country.

Yaksha Dhoj Karki, president of Federation of Contractors´ Associations of Nepal (FCAN), said massive construction activities carried out by both the government and the private sector have pushed up the demand for steel, leading to huge rise in imports.

“More than 40 percent of the total constructions activities in a year are carried out between January and March. Huge imports of iron and steel were made in advance to cater to the demand during the peak season,” Karki added.

Housing developers, who are the major buyers of rods and iron products, said rapid growth in the sector has fueled demand for iron and steel, prompting rolling mills to scale up imports.

“Companies that had already opened booking for apartments are busy developing projects. They have stocked construction materials required for more than six months,” said Min Man Gurung, general secretary of Nepal Housing Developers´ Association.

Tulsi Prasad Sitaula, joint secretary at the Ministry of Physical Planning and Works (MoPPW), told Republica that construction of a large number of bridges across the country was underway. “We are constructing more than 200 bridges this year, up from less than 150 in the last fiscal year,” Sitaula said, adding that about 150 quintals of rods is required to construct a 100 meters long bridge.

Trade experts opine that soaring prices of iron ore in international market is another major factor behind whopping rise in value of iron and steel imports during the period. Price of iron ore shot up to 184.61 cents per dry metric ton unit (DMTU) in December 2010, up from 95.95 cents recorded in the same month of 2009.

source: Ghimire, Prabhakar (2011),"Raw steel is nation's largest import ", republica, 10 Jan 2011