Kathmandu. After the flexible policy of the Nepal Rastra Bank, the expansion of residential loans is moving forward at a rapid pace. Banks and financial institutions (BFIs) have increased their investment in home loans after the loan-to-value ratio and loan limit were increased at the beginning of the current fiscal year.
In the month of July alone, about Rs 6.31 billion has been disbursed to house loans. This is 9 times more than the same period last year. Despite the contraction of overall credit flow, the data shows that home loans have rebounded.
With the easing of interest rates and other policies, the flow of housing loans has started increasing. Now the interest rate on home loans has come down to single digits. Bankers also say that the demand for housing loans has increased due to the availability of enough money to invest. Currently, commercial banks are offering home loans at an average interest rate of 6-7 percent. Some have also introduced fixed interest rate schemes.
According to analysts, the rise in housing loans is likely to bring some momentum to the sluggish real estate business. For a long time, the middle class was stuck without getting loans to buy or build houses. This has been made easier by the Rastra Bank by increasing the limit. According to experts, it will also affect industries such as construction, cement, steel, and stone. The credit to the construction sector is increasing among the loans given by the banks to the private sector. They say that the construction of housing has also made it easier.
According to experts, the construction of individual houses has also been encouraged due to the high rate of remittances. Experts say that the sluggish real estate recovery and the rapid expansion of residential projects have also increased the attraction of such loans.
According to the NRB’s policy, land up to Rs 3 crore can be purchased by taking loan. Earlier, there was a limit of Rs 2 crore. Also, for the first time, the loan-to-value ratio has reached 80 percent for loans for the purchase or construction of a house up to Rs 30 million. Earlier, this ratio was 70 percent. It is also easier for banks to invest as the risk in residential real estate loans is less. However, the sale of real estate is still slow. As a result, bankers say that housing loans have not increased as much as they should. Experts warn that if demand suddenly rises, there is a risk that real estate prices could rise again.
According to economists, housing credit expansion is not always positive. If investment in the production-oriented sector decreases, there may be an imbalance in the economy in the long run. In the short term, however, it will create jobs in the construction sector, expand the business of banks and facilitate the housing sector.
Nepal Rastra Bank (NRB) has also given priority to real estate and construction loans, indicating a more flexible policy. This is expected to help middle-class consumers buy homes and stabilise banks’ loan portfolios.
What is the state of the real estate business ?
The revenue collection from real estate transactions has decreased in the same period of the current fiscal year as compared to the corresponding months of the last fiscal year. In the first two months of the last fiscal year, the land transaction decreased by 7.22 percent or Rs 500 million. The revenue collection in the last fiscal year was Rs 6.92 billion while in the current fiscal year, it was Rs 6.42 billion. Although the transactions were the same in the first two months of the current fiscal year, the revenue collection has decreased as most of the municipalities have not completed the land classification work.
Although the government had opened the plotting of land from the previous August, the revenue from land transactions has decreased. Due to the large investment of the private sector in real estate, the revenue generated from the real estate business is also increasing the government’s income.
What is the interest rate for a home loan {{TAG_OPEN_strong_31 TAG_CLOSE_strong_31}}?
Currently, commercial banks are offering real estate loans at an interest rate of around 6 percent. The average interest rate of commercial banks is currently 7.76 percent. Some banks are offering home and car loans up to 6 percent. Rastriya Banijya Bank (RBB) is offering home loans at an interest rate of 6.30 percent.
Everest Bank is offering home loan at a fixed interest rate of 7.49 percent. Nabil Bank and Global IME Bank are required to pay a fixed interest rate of 8.99 percent. The maximum interest rate for home loans is 11.50 percent. The interest rate at which Machhapuchchhre Bank is offering home loans. Similarly, home loans are around 5 percent at the lowest interest rate. Rastriya Banijya Bank (RBB) is providing home loan at 4.97 percent interest rate to earthquake survivors and 5.04 percent to Nepal Army.
On the other hand, Agricultural Development Bank (ADB) is providing home loans at an interest rate of 5.55 percent to 8.55 percent. The bank has fixed a maximum interest rate of 8.55 per cent for home loans of 15 years and 7.55 per cent for 10 years. Similarly, Nepal Investment Mega Bank has fixed the interest rate from 5.78 to 7.78 percent for home loans up to Rs 30 million.
Nepal Bank (NBBL) is offering affordable home loan with a tenure of 5.89 to 7.39 per cent with a tenure of 25 years while NMB Bank is offering affordable home loan with a tenure of 10 years at 9.99 per cent. Everest Bank is offering home loans at an interest rate of 6.05 to 8.05 percent.
