Thursday, October 10, 2013

High housing prices in Kathmandu (most can’t afford)

A new study, as reported in The Kathmandu Post, shows that the average price (in Kathmandu, Lalitpur and Bhaktapur) of a housing unit is Rs 12.3 million and an apartment unit Rs 9.2 million.

This is beyond the reach of most of the Nepalese people. The existing demand and price is likely fueled by easy bank credits to developers and prospective buyers. The prices are unsustainable and a further downward correction is warranted to ensure that the prices set during the ‘bubble’ time are not persistently sticky at a high level even during the slowdown in this particular sector. Hopes of rebounding of the real estate and housing prices, which are still high even after about 30% reduction from its peak level around 2010, are not reasonable as this point of time. A majority of Nepalese still cannot afford housing and apartment units prices beyond their lifetime income.

The housing and apartment markets appear to have plateaued as (i) NRB has imposed a 25% cap on lending to real estate and housing sectors; and (ii) the number of customers that the BFIs thought creditworthy (at least in the books!) have pretty much maxed out (unless they broaden their horizon and come up with innovative, affordable stuffs).  

Excerpts from the news piece:

  • 82 percent of housing and 72 percent of apartment projects sold had price range of Rs 5-10 million.
  • Of the 858 housing units with a price value between Rs 5-10 million, 702 were sold. Likewise, 829 out of the 1,147 apartment units in the same price category were also sold.
  • A higher demand for low end, ready to move in and instant ownership transferable units, the report entitled, ‘Real Estate Market Outlook 2013’, states.
  • The average price for housing units stands at Rs 12.3 million, while the price of an apartment unit is Rs 9.2 million. A total 3,708 units of housing and apartments projects, out of 6,282, have so far been sold. This means 41 percent of units are yet to be sold.
  • Even between the housing and apartment projects, there is a higher demand for housing units. The study showed that 76 percent of housing projects have already been sold, while only 51 percent of apartment projects have been sold as of July 2013.
  • There are a total of 1975 housing units and 4307 apartment units in the valley.
  • The real estate sector has recorded a total average investment value worth Rs 64.4 billion, including Rs 24.25 billion in housing projects and Rs 39.75 billion in apartment projects.
  • The total investment value in housing projects is 37 percent, while 63 percent is in apartment projects.
  • The report has attributed factors such as preference for owner built houses, lack of buyer confidence, change in customer preference and lack of flexible financial plans towards the selling of total units and accomplished projects as major challenges.
  • The highest number of housing and apartment projects had been registered and launched in 2007-08, these numbers declined by 52 percent and 50 percent respectively in the next year.