Worse, customers are hesitant even though many housing developers in the valley and outside have announced discounts in a range of 10 to 20 percent.[break]
"Till early 2011, I was not eager to sell the houses at Rs 10 million apiece. But six months down the line, customers are still reluctant even though I have lowered the price," said Ravi Thapa, a developer at Pepsi Cola Town Planning.
Unlike individual developers like Thapa, who are open to publicizing their discount offers, big housing developers barring a few are still reluctant to make their offers public. "Their fear is such publicity might result in across the board drop in prices. If you approach housing developers, they will invariably offer you handsome discounts on the housing units on sale," said a senior official at Nepal Land and Housing Developers Association (NLHDA).
And, the nightmare that the developers refuse to share is that even after such price-cuts, customers are not responding positively.
"Clients visit my house almost every week. They talk as if they will buy it the very next day, but they never call back," said Thapa. The stories that NLHDA officials related in confidence are no different.
As a result, five Land Revenue Offices (LROs) that used to be heavily crowded in the past continue to cast a deserted look and the Department of Land Reform and Management (DoLRM) -- the parent agency for these offices -- says the volume of business is not even one-fourth of what it used to be two years ago.
"Transactions in the first four months dipped by almost half in the last fiscal year itself. It has further shrunk by around a quarter during the same period this year," said Tulasi Ram Vaidya, a DoLRM official.
As a result, the department´s revenue collections from land and housing transactions has dropped by about 25 percent during the period, compared to the same period last year. "This gloomy trend continued even in the month from mid-October to mid-November (the 4th month of the current fiscal year), when property transactions generally pick up," said Vaidya.
DoLRM records show the government mobilized Rs 90.5 million in revenue from realty trade during the month whereas it collected Rs 111.80 million in the same month last year.
The realty market has witnessed a sharp downturn since December 2009 when Nepal Rastra Bank imposed cap on banks and financial institutions´ exposure to realty loans, in a bid to stabilize the banking sector after fears that developers would sink together with the banks as the realty bubble was showing all signs of busting. Even though it excluded home loans up to Rs 8 million from real estate loans, people are still shying away from buying new dwellings.
"Reality is that consumers know land and housing developers are still holding on the prices and has no other option but to let the prices crash. They are anticipating prices to fall. Hence, they are responding coldly to the present personalized discount offers," said Vaidya.
The central bank had intervened in the realty market, mainly as prices soared unnaturally during 2006 to 2009 on the back of easy bank financing. Deteriorating law and order situation in Tarai and other parts of the country, which spurred rapid transfer of assets to Kathmandu, too had fueled the prices.
Since the NRB intervention, volume of transactions in the valley has shrunk sharply.
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