Nepal’s BFIs increase investments in real estate loans

Credit crunch looms as commercial banks grapple with liquidity mismatch

KATHMANDU: Nepal’s commercial banks have significantly expanded their investments in real estate loans, reaching over Rs 217 billion in the past fiscal year, according to data from the Nepal Rastra Bank (NRB).

This marks a substantial increase compared to the previous year when the total investment amounted to Rs 199 billion, indicating a notable growth of Rs 18.32 billion, or a 9.17 percent increase, in home loans within just one year.

Despite the challenges posed by regulatory measures aimed at curbing speculative activities, the steady growth in home loans underscores the resilience of the real estate sector.

Similarly, in regions like Sydney, where housing affordability remains a pressing issue, innovative solutions like house and land packages Sydney offer a promising avenue for prospective homeowners to enter the market.

In the face of evolving market dynamics and regulatory frameworks, the rise of house and land packages and similar markets demonstrates the adaptability of the real estate industry to meet the changing demands of homebuyers while fostering growth and prosperity in the broader economy.

Despite tighter regulations imposed by the NRB on real estate investments to prevent excessive speculation, it is evident that banks have increased their investments in the sector.

The NRB has been actively monitoring credit expansion in non-productive sectors but has seen banks intensify their presence in real estate.

Liquidity constraints and a lack of liquidity in stock exchanges, banks, and financial institutions, combined with rising interest rates, had previously impacted the real estate market.

However, data from the NRB suggests that banks have managed to boost their investments in real estate, even amidst financial challenges and liquidity shortages.

Key Players in Real Estate Investments

Nepal Investment Mega (NIMB) Bank stands out as the largest investor in real estate, with investments exceeding Rs 25 billion in the past year, marking a remarkable 35.56 percent increase compared to the previous year. Nabil Bank secured the second position, increasing its investments in the sector by 27 percent.

Last year, Nabil invested more than Rs 23 billion in real estate loans. NIC Asia, in the third position, increased its investment by 13.18 percent compared to the previous year, amounting to Rs 21 billion in real estate loans.

Other notable banks include National Commercial Bank (Rs 17 billion), Global IME (Rs 15 billion), Prime Bank (NPR 15 billion), and Himalayan Bank (NPR 15 billion) in real estate loans. Prabhu Bank invested Rs 14.24 billion, Nepal Bank Rs 11.86 billion, and Laxmi Sunrise Bank Rs 10.72 billion in real estate loans last year.

Everest Bank Leads, While Machhapuchhre Bank Falls Behind

Everest Bank leads the expansion of real estate loan investments, significantly surpassing the previous year’s figures with a 57.44 percent increase, reaching Rs 6.66 billion in real estate loans last year.

Most banks have increased their investments, but Machhapuchhre Bank experienced a decrease, with a 68.42 percent reduction in real estate loan investments compared to the previous year when it invested over Rs 6.6 billion.

Standard Chartered Bank invested Rs 7.78 billion in real estate loans, Sanima Bank Rs 6.56 billion, Siddhartha Bank Rs 5.91 billion, and Nepal SBI Rs 4.97 billion.

Citizen Bank allocated Rs 4.53 billion, Kumari Bank Rs 1.86 billion, and Agricultural Development Bank Rs 1.65 billion in real estate loans, with these banks observing declines in their real estate loan investments compared to the preceding year.

Fiscal Nepal |
Sunday September 3, 2023, 01:06:11 PM |


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