Stakeholders Call for Addressing Real Estate Sector Issues to Ensure Financial Stability
Stakeholders have stressed the need to address problems in the real estate business to maintain financial stability in Nepal. The remarks were made during the second day of a real estate conference organized by the Nepal Real Estate and Housing Development Federation in Lalitpur.
Attendees emphasized the importance of strengthening and organizing the real estate sector, claiming that recent issues and laxity in the industry have impacted the economy. They highlighted that resolving challenges faced by the real estate business is crucial for ensuring stability in the banking sector as well, given banks' substantial investments.
According to Nepal Bankers' Association President Sunil KC, Nepali banks have invested over Rs 625 billion in the real estate business, accounting for around 13% of their total loans. This investment is twice as much as in hydropower and on par with agriculture, making real estate a pillar of the economy for the banking sector.
Nepal Rastra Bank Executive Director Guruprasad Paudel stated that the central bank has oriented its policies towards institutionalizing the real estate business. He noted that the loan-to-value ratio for registered real estate is higher, and the bank provides concessions to organized business entities in the sector.
Paudel acknowledged that disorderly real estate transactions could cause problems in the banking sector, leading the central bank to encourage formal registration of real estate businesses. He expressed concerns about distortions, lack of transparency, and loss of state revenue in the unorganized sector.
Sunil KC, while acknowledging the need to change the perception of the real estate business as a non-productive sector, said that when bank interest rates decreased in the past, the real estate business flourished. However, this trend was not observed recently, despite low interest rates.
Kamlesh Agarwal, President of the Nepal Chamber of Commerce, highlighted the significant role played by banks in facilitating real estate transactions. He also noted that the real estate business, previously considered non-productive, is crucial for all sectors and serves as the backbone of the economy.
Agarwal mentioned that private sector industrialists have mortgaged properties in banks and are facing difficulties in repaying loans due to the current challenges.
Overall, stakeholders called for addressing issues in the real estate sector to ensure financial stability, given the sector's importance for the economy and the banking industry's substantial investments tied to it.
