Is Kathmandu going through a real estate bubble?. Investors borrowed so much money for real estate but with lack of buyers, isnt the real estate crash due soon?. I see a similar picture unfolding in India. Many people who invested blindly will surely get hurt big time. When the buyers default on their mortgage and investors default on their huge loan, then surely we can expect some big financial trouble. Many banks will get screwed!

actually the bubble phase has passed.....now you will see the "crash" unlike anything in the past......this is going to be really nasty for the whole economy....

Oh really? I was not aware of that. I read nepalnews almost daily but i have not seen any report regarding that. I had predicted this a few years ago to my friends that 2013-2014 will be real bad for both Nepal and India. Basically because after an unrealistic boom, it takes a few years to feel the pinch which is now. Unless a miracle happens, i see a very hard landing ahead. Lucky were those who went in and out during the boom.
I always wondered why would someone pay crores anyways to live in kathmandu, one of the most polluted places on earth?. I wonder why Nepal government cant plan towns like that of the West where they have say 20k population and are self sufficient in most basic needs. One of the best ways to uplift Nepal economically would be to make such towns all over Nepal and rich people would live in such towns and this would help adjoining poor areas by creating employment. Instead of concetrating all the rich people of a country in specific areas.

you may have read about the couple of so-called "tycoons" unable to pay their loans and several others actually on the run because they were not getting their return on their investment in the real estate sector......this is just the beginning....already, the price of land has gone down by as much as 30-40% in Kathmandu.....it would have gone down even lower but there is no buyer willing to purchase even in that rate.......still, the price will decrease eve futher....and this will cause a dominos effect which will impact almost all sectors of the economy.......hundreds of thousands will lose jobs, many others will have to live on the streets........this is what happened in Bangkok, Indonesia and other countries earlier........the real estate crash in Bangkok alone was the reason for the South East Asian recession at the time.........

No, actually i am hearing it for the first time from you.
Google searching only leads to some articles which question the unrealistic real estate price. Maybe the government is in damage control mode so as not to create panic. But i wonder why journalists are not making any analysis out of this. That would be nice to read.

Which Kathmandu are you talking about, ashishme? Kathmandu as in Capital of Nepal? Prices have gone down by 30-40% re? Care to share where?

It's true that sellers aren't able to sell their lands and properties as easily as before but if you've got a place in a decent location, finding buyers isn't really that tough. 

http://www.thehimalayantimes.com/fullNews.php?headline=House+and+land+prices+drop+by+30+per+cent&NewsID=356350

House and land prices drop by 30 per cent

   

It is a fallacy that land and house prices always rise. If that was the case then there is no need for anyone to work, let us all buy land and houses. Some people believe if a land is 1 crore this year, next year will be 2 crores and it goes on like that. This is total rubbish!. 
Greed always backfires on the greedy. USA is a strong country, she has many ways and means to tackle her monetary issues. Who will help Nepal and India if there is an economic collapse?. The greedy people have taken even the middle class people for a ride. But that should end soon hopefully.  

 

KATHMANDU, DEC 12 - After failing to attract bidders for Putalisadak-based Star Mall, crisis-ridden Nepal Share Market and Finance (NSMF) has extended the bid deadline by seven days for the second time.

The finance company had first called the bid on November 24 and had extended the deadline on December 9 after no one applied.
The sale of the shopping complex is must for NSMF to recover the money embezzled by its former chairman Yogendra Shrestha, who is currently in jail. Star Mall is promoted by Shrestha.

The finance company is ready to sell the mall located at one of the prime locations of Kathmandu, provided the bidders quoted around Rs 900 million. The Nepal Rastra Bank (NRB) has valued the property at Rs 1.3 billion.

Although the Citizens Investment Trust (CIT) was supposed to purchase the property, it is yet to decide on the matter due to high cost. “If the property could be sold at the price sought by NSMF, it will recover a big portion of the amount embezzled by Shrestha,” said Shyam Sundar Shrestha, senior manager at NSMF.

Shrestha embezzled Rs 1.72 billion from the finance company by creating fake loanees, as per a due diligence audit (DDA) report. He created 96 fake loanees to take the loaned amount by himself. The company has so far been able to recover just Rs 150 million from Shrestha by selling his shares in Machhapuchhre Bank.

The amount received from the sale of Star Mall will be first used to repay loans taken from Global Bank and Siddhartha Bank, where the property has been put up as collateral. These banks have invested over Rs 300 million in the mall.

The finance company also recovered Rs 375.5 million deposited in Star Saving and Credit Cooperative. The amount was recovered after selling Shrestha’s shares in Himal Hydro, which were put up as collateral at Star Saving and Credit Cooperative.

NSMF is also planning to sell Shrestha’s 24 annas of land at Kamaladi after completing Star Mall sales. As Shrestha owns enough property to recover from, both the finance company and the central bank have been saying NSMF depositors should not worry about their deposits.

Ever since the exposure of fund misappropriation at the company and subsequently the company was declared crisis-ridden, NSMF has been able to recover a substantial amount of loans that went to other loanees, although it struggled to recover from Shrestha.
As a result, it has been able reduce its liabilities to depositors considerably over the last year. When the fraud at NSMF was uncovered on May 9, 2011, the company had deposits worth Rs 3.12 billion and loans worth Rs 5.26 billion. But the company, as of a few days ago, has been able to reduce its deposit mobilisation to Rs 1.5 billion and lending to Rs 1.41 billion, according to the finance company.

NSMF currently has 13,000 depositors. Despite the recovery of a huge chunk of loans, its financial status is yet to improve as it is still struggling to recover the amount misappropriated by Shrestha.

When the finance company was declared crisis ridden on January 12, 2012, its capital adequacy ratio was negative by 5.73 percent which has now deteriorated further to 7 percent, according to NSM officials. “It is due to the conversion of a few good loans to bad over the period,” said NSM’s Shyam Sundar Shrestha.

Declaring crisis-ridden, the central bank had given NSMF six months time to improve its financial health, but the former is yet to take further action. An NRB official said the central bank was in ‘wait-and-see mode’ as the company is in the process of selling Star Mall.
Earlier, central bank had prevented Global and Siddhartha banks from auctioning the property, saying there were chances that the property fetched a better price if NSMF was allowed to sell the property itself. “The aim of central bank is to receive more amounts so that more depositors could be paid back their deposits,” said the central bank official.

This is where greed takes you. More will follow soon. 2013-2014 will be bad for Nepal. Imagine the ones who never get caught?. This is all thanks to the cheating culture created by Nepalis themselves. Where people who used to worship God before, now worship money.

Nepalis are greedy by nature....it is in our culture.

Actually more have already followed...Agni Air and Sita air ( probably ) are both on sale as well because the "tycoons" are unable to operate the airlines as they had invested hugely in real estate....so much so that this Basnet guy, who is supposedly a billionaire, cannot even raise Rs 50 million to keep Agni Air running....





KATHMANDU, DEC 05 - The consortium of banks that financed Agni Air has given the cash-strapped carrier until mid-December to pay up or face foreclosure. The banks and Agni Air’s promoters have been scouting around for potential buyers.
The carrier has been grounded for the last three weeks as it has not been able to pay its dues to the Civil Aviation Authority of Nepal (CAAN).

The chief executive officer of one of the banks in the consortium said that the carrier’s promoters had agreed in writing to pay the first instalment and the outstanding interest or quit. A consortium consisting of Grand Bank, Sunrise Bank and International Leasing and Finance Company have lent Rs 650 million to Agni Air.

“As the possibility of loan repayment is slim given the high liabilities of the promoters in different sectors, we are encouraging the sale of the airline’s assets to recover our investment,” said Surendra Man Pradhan, CEO of Sunrise Bank.

Agni Air promoter Sudhir Basnet has huge liabilities in the real estate sector as a majority of his housing projects have not been completed, and the flow of cash has stopped. The airline, which earned a profit in the last fiscal year, was also affected by the promoter’s other liabilities.

According to the lenders, seven parties have shown an interest in purchasing Agni Air including five Nepalis and two foreigners. Among them, Yeti Airlines Domestic and Swift Air Nepal are among the serious contenders to acquire the beleaguered carrier.
The banks said these prospective buyers had offered Rs 550 million to Rs 750 million for the airline. “The promoters, however, are asking for Rs 800 to Rs 900 million,” said bank sources. They added that Agni Air had initially priced its entire property and aircraft at Rs 1 billion. “We are ready to transfer the loans if a good party acquires the airline by paying Rs 200 to Rs 300 million to us,” said a lending bank official.

Last week, there had been intense negotiations for a possible sale of the airline with different parties. “Now, negotiations have been held at the very top level,” said an Agni Air source.

The banks are also conducting a valuation of the airline to facilitate its sale. “The issue will be settled within the next two-three weeks,” said a bank official. As long as the airline remains non-operational, its value will come down. That’s why the banks have been encouraging an early exit of the current promoters.

The airline not only owes huge amounts in bank loans, it has not paid its staff and landing and parking charges to Tribhuvan International Airport.

Three weeks ago, the CAAN suspended the operation of Agni Air for failing to settle outstanding fuel, landing and parking charges. CAAN officials said the airline owes around Rs 2.5 million to Nepal Oil Corporation and around Rs 6 million to CAAN. The airline has not paid salaries worth Rs 10 million to its staff.

Started in 2006, Agni Air owns five aircraft, three Jetstream 41s and two Dorniers. However, only one of the Dorniers is in an airworthy condition.

Agni’s woes began with problems in the real estate sector as its key promoter Basnet is one of the biggest land dealers in the country. A recession in the realty sector stopped Basnet’s cash flow which also affected the airline. Basnet has been blacklisted by the Credit Information Bureau for defaulting bank loans.

Fearing a possible outflow of funds to pay Basnet’s other debts, the banks have made a separate arrangement for repayment of their loans by excluding him from the management team, according to a senior official of a lending bank. As per the arrangement, Agni will have to repay its outstanding loans first from the revenue generated from its operation.

During Agni Air’s good times, it used to fly to eight domestic destinations including mountain flights. In the first half of 2012, it stood third among domestic airlines in terms of passenger carriage.

I see it differently. I see real opportunity to buy real estate if you have money right now. I see the rates of 1-2 bedroom apartment going for less than $50k with all amazing facilities that you can count on--underground parking space, walled security premises with swimming pool, basketball court yard, laundry facilities. You name it  and it is there all for under $50k for 2 bedroom.

I am VERY OPTIMISTIC about nepal economy than any other. 3 reasons:
1. Nepal Rastra bank has foreign currency surplus of US$ 2billion annually. Yes Nepal Rastra bank has that much of money. All the remittance coming to the country. It is only going up. No of workers going to abroad has jumped from 500 to 1500 daily. That is a huge number. Total number of workers going abroad stands at 6 million I think. Average entry level worker earns $300/monthly. So you do the math.
2. Nepal govt is collecting more tax than it can spend. So the govt has budget surplus. Due to increase in import and VAT, govt has noproblem collecting revenue. So that is good thing.
3. Tourist is up and up and up. Forget about getting hotel room, mountain flights and other services Peak season in Nepal during march-april-may and oct-Nov.
 

Well...the real estate market has matured and and there wont be a real estate growth similar to 2000 - 2009 anytime soon. The real estate market may or may not crash but for KTM land do not worry about getting crashed. If you survived this slow time you have survived the crash. There just isn't enough land in KTM to crash. Its too small of a place and way too many people want to own 4 Aana land in KTM. If you have EXTRA cash, may be its time to do the bargain hunting in KTM land.

1)$300/monthly salary to sustain a crore real estate price?
2)If people are borrowing to buy property as investment, then rental income will hardly meet the mortgage. Unless everyone has extra cash lying around, this will lead to a systemic banking failure.
3)How about all the investments that have already been made?. Unless everyone bought in cash, otherwise crores of loan repayment defaults will not be healthy for economy.
4)Nepal cannot rely on remittance alone to prop up real estate prices.
5)The fact that real estate prices have dropped itself proves that real estate is in trouble. Kathmandu may be small but if there is an economic collapse then size will not matter. Also be aware that Nepal is in process of decentralising. there will always be other options in near future. If you get in and out in a boom then it is good, but thinking that 1 crore invested in kathmandu will become 10 crores a decade later is a fallacy.
6)If prices are falling, why should people buy?. Should it not be wait and see?. Unless you are really desperate, it is better to wait couple of years.
 

1)$300/monthly salary to sustain a crore real estate price?

---- $300 monthly salary folks are not the ones who make Aana worth crores. Its the people with crores who are buying in crores. There is only sufficient land for Crore and higher players. Not enough space for little fishes to enter the KTM land game.

2)If people are borrowing to buy property as investment, then rental income will hardly meet the mortgage. Unless everyone has extra cash lying around, this will lead to a systemic banking failure.

------- Go back to answer number 1, there is not enough land in KTM for the borrowers, the land is barely enough for "Cash Only" investors. The market went up 1000%  in 10 years and corrected down 30%  until recently. Still lots of cash to go around.

3)How about all the investments that have already been made?. Unless everyone bought in cash, otherwise crores of loan repayment defaults will not be healthy for economy.

-------------It has not been healthy for the economy and we are already seeing the slowness in effect.

4)Nepal cannot rely on remittance alone to prop up real estate prices.

-------------Nepal cannot rely on remittance alone for just about anything. The remittance folks do not have enough to buy land in KTM. May be 100 heads remittance money trickles up to 4 Aana land in KTM. But there are almost 3 million remittance heads outside.

5)The fact that real estate prices have dropped itself proves that real estate is in trouble. Kathmandu may be small but if there is an economic collapse then size will not matter. Also be aware that Nepal is in process of decentralising. there will always be other options in near future. If you get in and out in a boom then it is good, but thinking that 1 crore invested in kathmandu will become 10 crores a decade later is a fallacy.

------------KTM land is not even enough for KATM folks....KTM does not need outsiders to prop up their real estate market. In the other hand, i can see KTM folks being pushed to the hills nearby due to land shortage inside KTM.

Finally you have made one belieavle point. People should not anticipate 1:10 boom for quite some time in real estate.

6)If prices are falling, why should people buy?. Should it not be wait and see?. Unless you are really desperate, it is better to wait couple of years.

--------- Prices are falling, and people are not buying, they are waiting and seeing unless desperate. That is what we have been seeing for last couple years....its may stay like that for another two years but THERE WILL NOT BE A CRASH.
 

Not sure why you are so desperate to prove that the market will crash. It is quite normall for the market to correct and slow down after a decade long spike like we saw last time. May be the 10 folds returns in real estate is gone but no way we will see the crash in KTM. Everyone dreams to own some land in KTM and there is just not enough for everyone. Even if the real estate market goes down in the whole country, KTM will be least affected.

1)It is not true that there are only  cash buyers as i myself know people who have taken loans and bought. Why are they then advertising 20-30 years loan?
2)30% drop is a crash, price corrections do not suddenly go 30%. If you had invested 1 crore in 2011, you would be down by 30 lakhs now. If it was your own cash then bad for you. If that was borrowed, then bad for bank and country.
3)It is not true everyone dreams to own land in kathmandu. I dont. And many people i know dont also.
4) The reason people are waiting and seeing is because the party is over.
5) My whole argument is based on borrowing from banks and i believe that is the case. However, if most are cash buyers then it wil not be so bad.

Real esatte price has already gone down. it wont go down any further. Thats right. There aint enough land in kathmandu. Most of the workers from Arab countries are trying hard to buy 4 Anna lands in kathmandu. There are not big buyers, but small ones. but bunch of small ones make up big.

What I see now is opportunity to buy 1-2 bedroom apartment in gated community. You cant go wrong for $40-$45k for 2bedroom apartment. These apartments are really well built with amazing facilities. I know the similar one goes for $400k-$500k in San Fran, boston, New York.

Nobody is investing because there is no stable government. I think everyone is waiting for govt to stabilize and then everything will go up. it does not take long for economy to shoot up.

you gotta see what is happening in Nepal. Just only at the airport, there aint enough parking space for big international planes. I saw there at least 10 planes from A330, B-777 to small ones while I was flying to Delhi.

talking to few friends who are in tourism business, they are saying they cant find hotels, flights, etc. Lots of folks are really excited and positive.

Things are happening back home. There are more opportunities since it is just opening and is in the process of decentralizing.

Govt getting $5-$6billion of remittance annually is no joke. I heard Rastra bank sells US$ to buy Indian Rupees. it seems funny but true.
I think real estate opportunities are still there for those who have cash.

For those who survived the crash, hang in there. better days are ahead. hopefully in 2013.

Happy New year.

1)There is fat chance of a stable government in Nepal. In fact, Nepal is headed for a big political turmoil, maybe even a civil war. The most important factor for economic prosperity is a stable government.

2)People have been saying real estate prices will never go down since the boom, but as can be seen from the report, they have gone down. So just merely saying it will not go down any further is mere speculation.

3)Yes Nepal is developing but real estate prices have to be realisitc. People must be able to afford the price. The price must not be driven by greed but realistic economic factors.

4)Health is wealth. Rather live in pollution free pokhara or dharan or butwal than live in kathmandu. What is the use of being a crorepati and dying with Asthma or some other disease?. Many educated people will realise this sooner. A place has to be worth it for the cost, if you think your health concerns are lesser than being a crorepati then all the best.