Central bank to reevaluate risk burden in real estate loans; Circular to determine revisions soon

KATHMANDU: In a bid to address the concerns and demands of real estate businessmen, the National Bank of Nepal has announced its decision to re-examine the existing risk burden in real estate loans.

Currently, real estate loans carry a risk weight of 150 percent, which has been a subject of contention among stakeholders in the sector.

The forthcoming circular, expected to be issued by the central bank in the coming days, will play a crucial role in determining the percentage of revisions to the risk weight for real estate loans.

Stakeholders have been earnestly advocating for the risk weight to be maintained at 100 percent or even reduced further to alleviate pressure on the real estate industry.

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Bhesraj Lohani, the President of Nepal Land and Housing Development Federation, expressed his opinion on the matter, highlighting the significance of the circular published by the National Bank.

He emphasized that despite the monetary policy’s discussions on reviewing first home buyers and the risk weight of real estate, it is the circular that will have a more substantial impact on the industry’s operations and future trajectory.

The Federation appreciates the National Bank’s response to the demands of First Home Buyers, acknowledging the importance of increasing the loan limit, a proposal that has been under consideration for an extended period.

Another pivotal issue raised by the Federation pertains to the loan-to-value ratio, a key determinant in real estate financing. The forthcoming circular is expected to address this matter, providing clarity and guidelines for financial institutions.

Additionally, the Federation has been advocating for tax discounts for first home buyers, aiming to incentivize homeownership and stimulate demand in the real estate market.

The policy of charging only a two percent premium on loans has been seen as a positive step forward, easing the financial burden for borrowers and enhancing accessibility to credit.

The revision of provisions in the circular is highly anticipated as it is poised to have a significant impact on the real estate sector’s health and growth. The NRB’s commitment to addressing the concerns of various stakeholders and its efforts to create a conducive environment for real estate development are commendable.

The decisions taken in the circular are expected to play a crucial role in bolstering the real estate market, encouraging investment, and promoting sustainable economic growth in the country.

As the circular’s details emerge, industry experts, real estate professionals, and potential home buyers will closely monitor its contents and implications.

The NRB’s dedication to transparency and effective policymaking will undoubtedly contribute to the growth and stability of the real estate sector and the broader economy.