http://www.ekantipur.com/np/2067/2/5/full-news/311760/

Maoist were the buyer during the peak time because they were cashing the black (blood money), once they were out of it new bank rule emerge and the price is not going up. 

Kati pardo rahecha aajkal aanaa ko?  Bishaalnagar tira jaggaa heroom bhaneko.  Tyaha mahango bhaye, housing unit haru kati jati parla?

I looked at some advertisings in hamrobazaar and it looks pretty arbitrary to me. jati man lagyo teti magera balchhi thapna baseko jasto. Bishalnagar tira 15 lakh aana bhanchha, but I don't think this price will hold firm. Key is not to buy from dalal, and approach the owner directly, who true to Nepali sanskar are always willing to bargain. In any case most of them probably bought land for 10 lakh ropani, not 10 lakh per ana less than 1 decade ago. My father told me that last year, several dalals approached him, but this year, there are really few inquiries. There are not many individuals left who can buy a small piece of land for 1 karod.

Had to happen sooner or later...

This year i wanted to buy a little piece of land and build a small house for myself. Since the price of land went up so high , I changed my mind. Its not worth it. With those kind of money I can start a small business in US.

Skeleton,

Dhanyabaad hai Pire.

I think unlike in the usa, in Nepal price doesn't go down immediately. It slowly goes down as buyers are scarce. In Kathmandu in particular, since most of the landowners are rich, they just tend to hold the land even if it is irrational of them to do so. So, it is those people in margin (those in loans, in need of sending kids to foreign countries for study, to pay back previous loans, loss of business, loss in dalali etc and willing to change business) who begin to sell  land first, and once the price goes down steadily, some others too join.

Does anyone know the extent of leverage in real estate investment in Nepal? Without that data, any prediction about the future defaults is mere speculation. Given the interest rate stays at the level it is today (I belive double digits), a faster drop in price may be observed. But it all depends on leverage. As Pire pointed out, if the real estate investors are mostly based on equity, then the price may not even fall as they can afford to hold on to their investment until they get their price.

I think it is more about Demand  and Supply. Currently Politics and Development  is centered around Kathmandu Valley. Demand of land is very high same time scarcity of land. Therefore realestae in Kathmandu valley will not go down unless dramastilay something happen. Similarly reals estate of mid  and western terai has skyrocketen recent years. People of hilly region wants piece of land of terai for various reasons  such as easy acess to transportation, hospital, education etc etc.Many of pahadi nepalese has flown out of eastern terai and have migrated to western terai because of ongoing violence from madhesi people.Nepal's population is growing, income is growing (overseas work) therefore realestate value in nepal will only grow. Therefore guys just buy a land in nepal asap.

 

Banks lent out money to be invested in the real estate in Nepal which is THE reason for the severe lack of liquidity of assets in Nepal and thus the high interest rates for deposits.
Kumari bank is offering a 10 percent interest on a regular savings account(not a fixed deposit) .
Even Bank of Kathmandu whose interest rates pa were around 2.5 is now offering a 7 percent interest on a regular savings account. This is going to divert the investments from real estate into bank accounts more or less. The unrealistic rise in the land value has settle down some time, the bubble has to go and Nepal is virtually on the brink of it right now.

I agree with pire to hold off on the investments in Nepal as of now because prices are gonna drop for sure and when they hit rock bottom in about a couple of years that would be the best time to buy land. India went through a somewhat similar situation in the past decade.

just a speculation ....

Hi Californication,

Thanks Pire for your suggestion.

Pire,

What increased prices in Butwal and Janakpur?

Foreign employment is what is increasing the land/house prices all over Nepal. Millions of foreign workers bring back money and they have nowhere to invest except in Land. For some time i wondered myself on how the Heck a foreign employment holder who makes RS. 15,000 per month in average was contributing to geometric price hike of land in Kathmandu.

Here is how it works, the millions who are working in the middle east are buying land where they can afford (sadarmukams), this caused a price hike at sadarmukam, the sadarmukam holders then upgrade themself to "Jilla" such as Janakpur, Biratnagar, Butwal, Hetauda, Narayanghat and such. Now those who are selling at "Jilla" are upgrading themselves to KTM. Thats where the demand keeps on coming.Then we have the banks with easy financing on Land/Housing adding fuel on the land prices on fire.

Now the government has put implemented stricter policy on banks on land/housing loans so this has slowed down the raging fire. But the fire will still be there as long as the foreign employment keeps on going for following reasons

1. People keep on pursing a "Nepali Dream" of owning a piece of land in KTM.

2. The limited supply but immense demand.

3. Land owners in no hurry to sell the land outside of their selling prices

4. Corrupt leaders wanting to invent their corruption money in KTM

5. Foreign Employment necessity/popularity

In last few months the housing prices seemed to have slowed down due to banking curbs but this has not brought down the prices. The transactions have reduced but the prices remain the same or even more.

Sid, what you said is partially right. But what you said merely explains that price must rise in Kathmandu, but it doesn't explain why it must rise by 20 times. Sure, to buy a house in KTM is a dream for a lot of people. But it is more of a dream of people who are regular jagire in KTM and had to live under the ornery houseowners. Lots of rich people outside KTM don't bother to buy the house in KTM, or if they buy, they buy the house with commercial possibility so that the house can be rented. A neighbor of mine(from outside of KTM) , who owns a house in KTM but is planning to sell because raising rent from tenants has become an exercise of its own, tells me that he would rather just put money in the bank and live off the interest. Even govt treasury offers 9% interest in Nepal now.

Pire,

I have not said that the price must rise, i was trying to make a point that land/housing market is very less likely to crash for the reasons i have given.

At this point i would not buy anything anything in KTM Metro myself but i think there is still opportunities in the outskirts (near the valley hills).

Housing markets in India and China are still on the rise, we will get some of that trickle down as well. My father was saying we had a similar slow down around 2052 BS.

So i think selling now is not a bad idea at all. But if you are holding something and do not need to sell it short term there is no need to panic. Most of the lands are being held by individuals and are willing to hold it until they get there price. So if someone is looking to buy then they should wait for sometime to see if the prices goes down short term.


My attempts to answer your questions:

The key questions of interest are: why this
sudden discontinuous jump?

No other place to invest but in Land or House


Sure, Maoist problem was rising since 1995
or so, people began going abroad in large mass since early 90s, but why
now?

People did not really start going out until the middle east property boom. After the 2000s

 After the Maoist problem has actually ended and all fires in
Madhes seems to be less than in previous years? Why jump , rather than
a continuous increase?

Same answer again, no place to put the money in, place for corruption money, High demand less supply.

How would the market correct it?

We may see a slow down of 2052, where the prices did not move for couple years. But do not expect to see a correction like we saw in the first world market such as US, Europe, and Arab. In Nepal most purchases are done with Cash and not leveraged.

But i do believe that if the day laborers export to  Arab reduces significantly we can only pray for where the prices should be at.

The prices are so ridiculous that it seems almost impossible to move back to Nepal and buy a land and a house.

Still we like to hoard asset in the form of land, temporarily the price may be down due to restriction and regulation on Bank Loan.

The price fall is temporary and may not hike as it happen in 2-3 years, Now we will see it stabilized, as it is said , most Maoist cashed their blood money and we have this new regulation. It is hard to predict Nepal and it's norm, as the global real estate bobble started Nepal Rastra Bank had to bring this regulation immediately, but it not going to happen because in Nepal a single person may alter the entire Nepalese rules and regulation. Do we have any people who is sincere to the motherland? Hake not ? Are are running after something. I am not different.    

GOKHARAKNATH LE RAKSHA GARUN.