The banks and financial intuitions (BFIs) are still feeling the heat from realty disaster. The number of defaulters from the realty loan has gone up by many folds. BFIs have put around 1000 units of land and housing up for the auction in the second quarter of the running fiscal year. The number of units up for auction normally used to be around a dozen.


BFIs have invested around 120 billion in the realty sector and they are facing problem recovering their loan as well as the interest from their investment.


According to the experts, the situation might still get worse in the upcoming months.


“Banks are to be blamed for their current state as they invested for speculative purposes and now it is hitting them back. The real state of the problem will be seen only around the mid July 2012,” said Sashin Joshi, CEO of NIC bank, at an interaction program organized by Nepal Economic Forum.


So, to ease the current scenario in the banking sector, government is planning to take some steps.


However, the possibility of introducing the asset management company any time soon was denied by Deputy Governor Maha Prasad Adhikari. “To save the system we are even ready to introduce asset management companies but it should be used only as the last option as it will be bail out mechanism for those people who took millions of loan from bank promising to create jobs but didn’t do anything productive for the country and invested in realty sector for their personal good,” he said. “The size of realty is not big in Nepal, there are problems and we may incur losses but the future is not that bad. Any amount of loss is lesser than the lesson we learnt from realty bubble.”

On the other side, to improve the current state, the government is planning to increase the loan limit on the personal loan for the realty transactions, as well as trying to tempt the officials to buy apartments and is also planning to make it possible for even the foreigners to buy property in Nepal.


The full damage made by realty sector in the Nepalese economy is yet to unfold as currently remittances have helped to ease the problem a lot.