The overheated market suddenly went slack after the Nepal Rastra Bank placed a cap on realty loans exposure of banks and financial institutions (BFIs) slowing credit flow in the sector. [break]
According to Land Revenue Office (LRO), Kaski, only 1,501 new transactions were carried out during the first month, ending mid-August, and 1,518 transactions were recorded during the second month, ending mid-September, 2010.
Last year, transactions during the same months had reached 3,394 and 4,127 respectively.
“Revenue collection for the period has dropped to one-third of what we mobilized during the same period last year,” Rishi Ram Lamichhane, registration officer of the LRO told myrepublica.com.
The LRO´s record shows it mobilized just Rs 33.30 million in revenue over the first two months of the current fiscal year, whereas it had collected Rs 96.20 million during the same period of 2009/10.
The office had collected over Rs 40 million in 2008/09. “The figures suggest, the land transactions in Pokhara have dropped to three-year low,” said Lamichhane.
He attributed the drop to continued tight policy maintained by the central bank on real estate lending.
Referring to the volume of transactions recorded over recent weeks, LRO officials assessed that the gloomy situation in the real estate transactions will continue in the third month of this fiscal as well.
Despite the revenue loss, the officials tagged the slowdown as a positive indication arguing that the real estate market had been overheated for no logical reasons and the prices had rallied unnaturally.
“The prices of land in the vicinity of Pokhara had jumped as much as 15-fold for no solid reasons,” an official at the LRO said, adding that the latest trend was indication of market taking a course of correction.
Longtime realtor of Pokhara, Shyam Kumar Shrestha, agreed with the official. But he noted that it could turn hundreds of people who have bet their money in real estate business bankrupt.
“The bust of real estate is looming. If the government did not change its policy, it could turn hundreds of investors penniless,” he added.
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