Nepal’s new Monetary Policy is a boon for banks and housing developers

Nepal’s new policy has been a big boost for the country’s housing developers and banks. The new monetary policy, which was announced on July 28, 2010, by Nepal Rastra Bank, would allow banks and financial institutions to lend 25 percent to the housing sector and 15 percent to the real estate sector. However, the total loan exposure in real estate and housing should not cross more than 40 percent.

As per the December 2009 directive of NRB, Banks and financial institutions should downsize their loan exposure to real estate and housing to 30 percent by the end of this fiscal year.

The move was taken to control the rapid expansion of the country’s realty sector. NRB ordered the banks to limit their loan exposure to real estate to 25 percent of their total loan portfolio.

Till date, the total loan exposure in housing and real estate is Rs. 98billion accounting for 21.07 percent of the total lending of the banks which stands at Rs.465 billion.

Because of this announcement, the amount of housing loan would go up while the real estate sector loan would decline. The change was made by NRB after it received complains from banks and financial institutions and housing developers.