It seems that the Banks and Financial Institutions (BFIs) are slowly emerging out of the liquidity crunch in recent times. Even with deposits soaring, they had not lowered the borrowing rates. This was a source of disincentive to the possible investors. The fact, however, remains that the traditional avenues for investment were not proving to be attractive or money-spinners. This very fact and the mushrooming of BFIs was also making it difficult as far as their sustainability was concerned. The urgent need to expand the capital base saw a succession of institutions merging so that huge investments could be made with convenience. In this context, it would be appropriate to mention that before the liquidity crunch, the real estate provided the ground for making heavy investments. In the initial phase, not only did the BFIs earn handsomely, but the borrowers too kept up their repayment to them for the loans taken. But, once the real estate sector saw crisis, the Banks and Financial Institutions were in for rainy days. However, with some efforts from the Nepal Rastra Bank, things slowly are showing signs of recovery.
Now, there are signs that the commercial banks, which had been shy of investing in the real estate sector, do so because they feel that liquidity is not a problem any more. The BFIs seem to be sitting on abundant cash without any other investment sector in sight except for very big projects like hydro-power. Maybe this could be the reason why the said institutions are once again eying the real estate sector for making investments. That would at least mobilise the funds that have accumulated with them, and for which they have to pay the depositors, but without earning anything because it is mostly in an unused form. With flexible policies, and lower interest rates than earlier, they would be successful in finding borrowers with the intention of investing in the real estate or as an apartment buyer. That would not only benefit the interested borrowers but also the BFIs which have enough cash with them lying idle. Moreover, it would also see some flow of cash in the market—enough to revitalise the
economy. The real estate sector has seen around only 10 per cent of the total investments of the BFIs, whereas the limit is 25 per cent, as per the central bank’s directives. That points to the inadequate
investment in the real estate sector. This obviously points to the fact that the BFIs can invest
substantially in the real estate.
As per unofficial estimates, only about 25 per cent of the apartments have been booked, which has not made up for the investments made by the BFIs. Now, if they could make it easier for borrowers to take a loan of less than Rs. 10 million to buy apartments, it would put energy in the housing sector, thereby, the economy to some extent. In fact, the whole problem is with low investment forthcoming in development activities by the government. If only, such activities were regular, there would be enough flow of cash in the market which would spur agricultural and industrial growth. A little loosening of the purse is what some BFIs are planning on that would naturally spread the money, and the real estate sector that is in trouble would see its revival as a vibrant one.
Take strict action
It seems some guesthouses and restaurants are engaged in immoral activities. The other day the police swooped down on a couple of them in the capital and nabbed several couples in compromising positions. The locals of the area, where the restaurants and the guesthouses are located, have been complaining all along that such activities are taking place. These activities are a blot to society. Since these places are used as a front for immoral activities, it is necessary for the authorities to closely monitor what is taking place there. If they suspect foul play then they should nab the erring parties and punish them without fail.
These immoral activities not only take place in the capital, but from time to time we hear about them in guesthouses and restaurants in various towns of the country. The locals make complaints to the authorities, and it is only occasionally that they clamp down on the defaulters. It thus stands to reason that these types of illegal activities should not be allowed to take place in the larger interest for the creation of a healthy society.