This has built distress, especially as developers were already haunted by higher borrowing rates and calls from banks and financial institutions to repay loans at the earliest, in Pokhara, one of the fastest growing realty markets in the country. [break]
“Pressure has mounted heavily and developers are really in trouble,” said Bindu Thapa, a leading developer of Pokhara. He informed Republica that a few developers have already started selling property at lowered rates fearing that they might lose personal property they have pawned at lenders.
“Some others are busy running away from clients, especially as they are demanding developers to refund the advance they paid for booking the developed plots,” he added.
There are 50 registered land developers in Pokhara. In the midst of boom and jump in prices, informal developers had mushroomed to number about a thousand in Pokhara and its vicinity, according to the estimation of District Land Revenue Office (DLRO). Most of them are operating with loans from banks and financial institutions as well as relatives and friends.
However, transactions of land in Kaski, Pokhara in particular, has dropped almost to half of the past in recent weeks after the central bank tightened banks´ and financial institutions´ loans in the realty sector.
“This sudden plunge in demand has seriously affected the developers,” said Thapa.
Statistics of DLRO shows that the number of transactions in Kaski, which used to cross over 250 a day till mid-December 2009, dropped to about 200 transactions a day by mid-January 2010.
“The volume has dropped further sharply over the last 15 days,” said Mukunda Dhakal, chief of DLRO.
Most of the transactions carried out these days are deals that were fixed well over a month ago. With developers facing difficulty in finding new buyers, DLRO expects transactions to drop further this month.
Registration Chief at the DLRO, Rishi Lamichhane, said that the realty market that caught upward spiral from mid-January last year has caught downward trend in just about a year.
Thapa, who is among a handful of developers supporting the central bank´s move, said that it had become very necessary, especially as unfair competition and manipulations had soared prices unnaturally. “It has taught lessons to the manipulators,” he said, adding that property buyers have presently adopted ´wait and watch´ policy. Given the trend, he even anticipates the market to crash soon.
DLRO officials too admitted that distress has already built in the market and the developers could succumb to the pressure anytime and start distressed selling.
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