JAN 15 - Bijay Rajbhandary is chairman of the CE Group that has interests in construction, consultancy, construction management, education and finance. Rajbhandary, who holds a Master's in construction management from the University of New Mexico, U.S.A., is currently involved in seven housing projects. The Kathmandu Post talked with Rajbhandary on CE's housing projects, the current situation of the housing business in Nepal and its prospects. Excerpts:

What is the current situation of the housing business in Nepal?

The current situation in the housing business is definitely in turmoil. There are so many stakeholders involved in this business including financial institutions and the government. Nobody has been able to give clarity over the controversies we've seen in the past few weeks. I would say it is in a state of confusion due to the central bank's decision to curb lending to real estate by financial institutions and the steps taken by the Department of Land Revenue. I think these developments will have an impact on the national economy too.

Last year saw the housing business expanding rapidly in Nepal. What big is it?

In Nepal's context, buying and selling land and development of property on that land is called real estate. In the last one year, there has been significant progress in the housing business because of rising land prices. Whether this boom was due to market demand or not, we're not sure. Given the number of projects within and outside the Kathmandu Valley, I assume the size would be around Rs. 100 billion.

What has been the impact of the central bank's move to impose a ceiling on bank lending to real estate?

The central bank's ceiling on real estate lending has already had an impact on this business. After Nepal Rastra Bank put a cap on loans, it has become difficult to get money for new real estate projects from financial institutions. Moreover, financial institutions are reluctant to release the committed loans for ongoing projects. The banks are even saying we can't give you a loan, go somewhere else.

What are the challenges that this sector is currently facing?

First of all, the respective roles of all the stakeholders should be clarified. The Department of Land Reform a few weeks ago said it would be imposing a land ceiling. It should clarify this statement by saying that it is not applicable to housing or by lifting it totally. In fact, we're working with uncertainties. And its consequences could be anything. The housing association, the government and the central bank all have to clear the uncertainties seen in this business.

Many people say there are more speculative buyers than actual buyers. What do you say?

When there are no other business activities in the country, investment in housing has become a compulsion for many. If people have money and they see better prospects of returns in housing, they wouldn't hesitate to invest there. And there is not much of a choice for them. Industries are not doing well, ditto with tourism.

What should be done from the government side to make this business more sustainable?

The government should form a taskforce comprising all the stakeholders. And it should carry out a comprehensive study which would give a clear map for future. The central bank imposed a ceiling on lending to real estate without consulting with the Land and Housing Development Association. My point is that it should have held consultations before taking the decision.

How has CE Construction progressed in the housing business? What are the projects that CE is currently doing?

As of now, we're doing seven projects in housing. We've categorised it into three groups -- stand alone, apartments and cluster housing. In the stand alone category, we're currently doing three projects. CE is implementing some of these projects with strategic partnerships. For example, CD Developers is constructing Grande Towers, Veena's Residency and Harmony Housing. Likewise, CM Developers is busy with Vinayak Colony and Rio Apartment. And CE is developing some projects on its own.

Despite policy uncertainties, CE is currently in a comfortable position. And it is due to certain measures we've taken. We buy the land ourselves and we've an in-house design company, CE Services. CE Construction does the job of construction. And the job of providing materials required for the construction is done by our trading division, C Plus. All these institutional arrangements have made our housing and apartments cost-effective in the market compared to others.

Posted on: 2010-01-15 10:12

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