The COVID-19 pandemic impacted the real-estate arena with a massive exodus. We see too many “to-let” signs with a vast number of tenants vacating out. The uncertainty looms around and because the country's economy is on back gear, people are hesitant to start new businesses or buy/ sell property!

However, during the year, 2020, definitely did come up with challenges but the time spent inside during the strict lockdowns across the country probably caused many people to rethink how they live. That is why many people see a unique opportunity in the housing market. Rather than acquiring a new personal residence, they are looking to buy property to rent out.

Nevertheless, let’s look at the current housing market trends:

1. Fixed Interest Rates
The Nepal Rastra Bank has directed the banks and financial institutions (BFIs) to maintain fixed interest rates for the loans that have at least one year or more repayment period. This provision applies to all individual loans, including home loan/housing loan, auto/vehicle loan, and hire purchase loan, given with more than a year’s repayment period, that have monthly or other periodic repay provisions. The BFI's of all classes, commercial banks, development banks, and finance companies should now change the term of references of the individual loan dispensed with monthly/tri-monthly/periodic repayment options to implement stable interest rate at the request of the customers.

2. The arrival of the Initial Environment Examination (IEE) and Environmental Impact Assessment (EIA)
The central bank has further clarified its provision regarding Initial Environment Examination (IEE) and Environmental Impact Assessment (EIA) while lending to the projects and industries.

While lending to the projects and industries, the BFIs must ensure that the former has obtained the approval of IEE and EIA reports of the respective projects from the respective agencies. In the case of projects that do not need IEE or EIA, the banks must analyze them by themselves.

3. Loan-to-value ratio lowered in the Capital-Kathmandu
The NRB has raised the ceiling for a home loan to Rs15 million from the existing Rs10 million. The NRB has defined home loans as credit extended by banks and financial institutions for the purchase of a house or an apartment for residential purposes or to rent it out. Such credit should be extended based on the income source of the borrower.

The NRB’s latest directive has also revised the loan-to-value ratio for credit sought to purchase real estate in the Valley to 40 percent. The loan-to-value ratio for credit sought to purchase real estate outside of the Valley has remained unchanged at 50 percent. This was done by the NRB to discourage the expansion of real estate and housing businesses in the Kathmandu Valley only and to enable the sector to grow in other parts of the country.

4. Potentially Buying at the High
There are, of course, risks to consider in this real estate market. We are seeing significant numbers of people moving out of cities and into the suburbs or smaller urban areas. As a result, certain property markets are at all-time highs. The rental price has gone down but there have been no discrepancies when it comes to prices of land or buildings that have been put on sale.

5. Real estate sales go down
According to the Land Revenue Office (LRO), other businesses have started returning to normal since June,real estate business has declined by more than one-third, The real estate turnover in Kathmandu declined by 35 percent in June as compared to the turnover in February.

As per the Land Revenue Office, there were transactions of 1,234 units of houses and land in January and 1,269 units of houses and land in February. However, only 861 transactions in June!

Times are challenging for the real estate scenario in Nepal. But these are all the trends you need to look out for in this current time of crisis. Take Control of the Trends With a Top-Notch Real Estate Agent Whether you are selling or buying, you can take advantage of the current trends by partnering with a professional real estate agent. Our team will match you with agents we recommend in your area.