December 17: The liquidity crisis in Nepal has deepened in the last 4-5 months. 

All the economic indicators are disappointing while businessmen are not getting loans from banks even for urgent work. The stock market and remittance inflow have also been steadily declining. However, despite most of the economic indicators looking disappointing, the real estate business in November has been very encouraging. 

Although the post-Dashain and Tihar season is considered as the peak season for real estate business, the real estate business was expected to be affected this year as banks were unable to provide loans. But the figures of buying and selling of housings and land in November have dismissed all such apprehensions. And the assumption that large sums of money outside the banking system are active in the real estate business in Nepal has been further strengthened. 

A total of Rs 7 billion revenue has been collected from the purchase and sale of 70,000 houses and land plots in November this year against the transaction of 65,000 houses and land plots during the corresponding period of last fiscal year, when only Rs 5.5 billion revenue was collected. 

Although slightly higher in numbers, the situation is quite different this year compared to last year. While liquidity was plentiful in the banking sector last year, it is not possible to get loan from banks even for urgent work this year. 

Revenue worth Rs 5 billion was collected in October from the transactions of 50,000 houses this year. But in November, when the number of transactions increased by 20,000, the revenue increased by about Rs 1.5 billion. 

Chartered Accountant Sudarshan Raj Pandey says this data further confirms the suspicion that the real estate business has been booming even when the economy is in crisis because a large amount of money has been circulating outside the banking system. 

“In Nepal, among the total money sent to the market by Nepal Rastra Bank, not more than 30 percent has reached the banking channels,” said Pandey, “Even if 10 percent of the money is with people, 60 percent of the money is circulating in the non-banking sector.” 

He said that one of the areas where money flows through non-banking channels is the real estate. 

How does black money run on real estate? 

The land administration has not been able to determine the scientific value of real estate. Banks assesse the price for the disbursement of the loan, while the Department of Land Reforms and Management sets the price for the purpose of raising revenue through land and housing transactions. 

Real estate experts say that the price is up to 10 times higher than the minimum valuation and a large amount of money is dealt through cash-in-hand.

 “Nepalese businessmen are not allowed to invest their earned money abroad. Keeping a large amount of money raises eyebrows. The best solution is to buy a house and land. When buying land, they transfer half of the money through the banking channel and the other half through the non-banking channel,” a source said. 

Experts say that the real estate sector is the safest place to keep the money earned by any industrialist through tax evasion or through corruption by politicians and government employees.