The interventions needed were already in place and the latest step was simply not well-timed. The new measure, which though allows owners to keep land and housing as collateral a day after its purchase, will only unnecessarily give birth to an informal overnight lending channel at hefty interest rates. Moreover, the latest measure, which – according to the Ministry of Land Reforms and Management (MoLRM) – was one of the recommendations of a probe team formed after it traced a number of nefarious overnight land dealings worth millions of rupees in Pokhara, doesn’t seem to be in tandem with a series of steps taken by the Ministry of Finance and the central bank.
We have long been writing in support of the number of initiatives taken by the government after January 2010 to calm down the overheated realty sector. We also applauded the tactfulness shown by it in bringing back the sector on track and achievements made in that direction have been laudable. Financial risks exerted by heavy loan exposure of financial institutions in the realty business have largely subsided as a result of the stringent measures taken and lending agencies have started looking elsewhere for fresh investments.
Hence, we wonder why MoLRM decided to unnecessarily intervene in this way at this juncture in the name of checking illicit transactions.
The government must keep in mind that while it was important for it to take steps to bring a semblance of normalcy to the real-estate and housing business, it should be careful not to enforce regulations that might completely annihilate the sector. We urge it to take time to examine the possible implications that it might have on the overall economy.
It should not forget that less than a year earlier, the same business was giving it all the reasons to smile as it grew at breakneck speed and produced whopping profits for banks and sizeable corporate taxes for the state. We completely support steps aimed at curbing illicit transactions in all sectors, including real-estate. Our reservation at the moment is that the latest measure is not sensible to the jitters that realtors and banks are presently facing. Hence, we urge the government to look into other options to achieve their objective.
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