This piece was first published in the The Reporter Weekly
The government is seeking to bring an 'immediate scheme' to revitalize the endangered real estate sector. The Ministry of Finance (MoF) and Nepal Rastra Bank (NRB) are trying to push commercial banks to reinvest in the sector through some new policy measures, much against their earlier harsh attitude while they were massively investing. No matter what policy measures are taken, the commercials banks are reluctant to walk along with the government's decision at this juncture.
"I don't think that the commercial banks will invest again in the real estate sector in the coming days," a senior executive from a leading commercial bank told this scribe, adding ‘there is enough skepticism regarding our future role on the real estate investment.’
Government officials are not confident either over the new policy authored by the MOF and the NRB. “This appears to be a very disparate attempt to get some banks to invest in the real estate with some political interest in mind”, they say. "Many of the real estate brokers are the party cadres as well," a senior MOF official said, adding "I am aware of the political flavor in this issue but there is still some hope of getting the economy better.”
But there seems to be no doubt that the MOF-NRB move in the name of resuscitating the real estate transactions is an outcome of the pressure from the real estate brokers. "I can’t at this stage disclose details of the conversation and the peoples involved in it, but the hasty route that the government is travelling is not influenced by the thoughts to rescue eco9nomy", he said.
Bankers do invest their money where there is a security of their investment and chance of making profit In this case, the government is asking bankers not to pressurize borrowers for repayment of loan distributed in the past. At the same time, M O F is considering to increase ceiling of an 'individual loan' for the real estate brokers from existing Rs 8 million to Rs. 10 million. "It might fuel to increase the economic activities, but not definitely in a healthy way,” an analyst--who refused to be identified said, "This is not a visionary step , and simply may work as a short-term remedy."
Banks and Financial Institutions (BFIs) have already invested Rs 1 trillion in the real estate sector. BFIs are not getting any repayment of this loan. The provision that the NRB is going to establish to postpone the deadline to 2070 B.S. for ceiling of the 25 percent of 'real estate loan' out of total loan of a bank is 'suicidal' in the long term. "This is just a postponement of suicide date,” he said, asserting that it is not going to address the root cause of the economic malaise.
Along with the real estate and share market, the government is also going to take the responsibility of selling the apartments built and owned by the private sector. Many think the government's step towards subsidizing the apartments to its officials is a way of wasting the money that is collected from revenue.