Bijay Rajbhandary is committed to enhance professionalism in social-techno development activities. He has established diversified ventures with CE Construction Pvt Ltd as a core business enterprise. Having gained experience and exposure in the US, he returned to Nepal in 1992 and is today the founding managing director of CE Construction, Grande International Hospital, CE Overseas, CE Services, CM Developers and CD Developers and founding director of The Comfort Housing. Rajbhandary, who has also undertaken responsibilities in various national and international companies and institutions as a client, consultant, contractor, developer, educationalist, industrialist and above all as an entrepreneur, spoke with Terence Lee of THT Perspectives about the current state of the real estate sector in Nepal.
What is the real situation of the real estate sector?
As far as real estate is concerned, everyone knows that it is not doing as well as it could. That means there is ample scope because there will always be a real need for housing. This is a viable sector because in our context, the concerned authorities are unable to provide the required infrastructure facilities and people want to improve their quality of life. I believe we are having a very hard time at present but there is ample potential for this sector to improve. There has to be transparency and if the entire realty sector can maintain this, I’m sure it can make a comeback in six months and survive the present crisis. It is important to prevent a total shutdown because that means that developers’ and buyers’ money is blocked and projects remain incomplete. It’s important that real estate companies sell at realistic prices and forget about speculative prices. At the right price, supply is still short and they can still sell at premium.
But isn’t it true that land prices and transactions have fallen and the sector is lethargic?
In the beginning, there were many high-end products in terms of community living and apartments but the majority of those buyers were investors. Now because of the constraints and non availability of funding from banks there are problems. But we at CE have come up with a middle level product. Today, the demand is not there for high-end products and apartments. But we are coming up with individual homes at very reasonable rates that target end users. We recently launched two such projects that were very well accepted and we have been able to sell up to 90 per cent in a week’s time. Based on that, we are coming up with independent home colony based projects where we don’t have lavish infrastructure facilities and the target group is the budgeted end users who want to upgrade their quality of life to a limited extent. There is ample demand for such products.
Will we see a further lowering of prices or cheaper products in the future? How will real estate developers fare in such circumstances?
There is still a great potential for the real estate sector in Nepal. Real estate companies now need to focus on the end users and budgeted clients. There is demand for individual houses below Rs 60,00,000 and for apartments at around Rs 25,00,000 to Rs 30,00,000. These are still selling like hot cakes. We ourselves are coming up with three new projects. What this means is that the real estate industry is facing a hard time for lavish high-end products but it is not over. We have to change our focus and head towards a different kind of product. The prices are now actually very down to earth.
What do you think needs to be done to help the real estate sector make a recovery?
To get back on a healthy track, all stakeholders like the government, financial institutions, developers and buyers need to create the right environment. Today, financial institutions are unable to provide finance to developers because they did not meet the terms and conditions. Similarly, buyers who were investors are not interested now because the prices are falling. They are in a wait and watch mode and we need to work to remove those fears. We must create an environment that says this is probably the best time to invest in real estate. At the same time, for end users, we need to ensure product delivery on time as per the agreed conditions and terms. We ourselves have been able to deliver three projects on time despite the difficult circumstances and environment and that has given us tremendous mileage in the current context. That’s why people are coming to us even for our new projects.
Will real estate companies have to cut profits to survive?
Actually, construction costs are rising because labour and building material cost have gone up. When we price our product, we will have to consider real estate as an industry and not put a speculative price. We now have very technical prices that include some profit added to our base cost. As far as we are concerned, we are reducing the percentage of profit for the time being and are assuring buyers that we are actually
20 to 25 per cent cheaper than building their own house.
Unfortunately investors and buyers do not know the gravity of the problem and many of them get information that is superficial. They say real
estate is over and everything is going from bad to worse. I tell you it’s not that bad and I have proof. I have just handed over three projects; I am planning another three and am currently running four projects. So how can you say it’s bad? I am still growing and if things improve a little I can double my turnover. There is still the potential of institutional sales to the government or army et cetera and this has not even started yet. At CE, we have the luxury houses, now we want to work on budgeted houses and then we will move on to institutional sales.
What are the biggest challenges to doing business in Nepal?
As an entrepreneur who started from scratch with an income of Rs 75,000 in 1992 after returning from the US, I see political instability as the biggest challenge to the business environment in Nepal. In the real estate sector we have come up with a Rs 10 billion portfolio and have established many diversified centres like hospitals, industries, education and financial institutions. There is growth and tremendous scope for business in Nepal provided there is political stability and an environment for business is created. Without that, no industry can prosper. The economy has almost collapsed and we need concrete steps to be taken by the government.
The current need is for the government to create a stable environment and pursue its development projects. That will inspire confidence and even attract foreign investments. There are many foreign investors waiting to invest in Nepal, especially in hydro-power projects, but they want to see stability in the country before they invest. If there is stability, I myself can bring in a billion dollar investment and there are many entrepreneurs like me who can bring in such ventures.