Former Miss Nepal Malvika Subba had a successful career in TV before she gave up show business for the distinctly less glamorous job of selling houses.
“This is where the money is,” the former actress and presenter said in her plush new office in downtown Kathmandu. “When I was offered a job marketing real estate, I said ‘yes’ straight away, because it looked interesting and I could see that business was booming.”
Subba is head of sales and marketing at Nepalese property developer Shangri-La Housing, which builds and sells luxury apartments — until recently a virtually unknown concept in Kathmandu.
As the global credit crunch has sent housing markets around the world reeling, Kathmandu is experiencing a surprise property boom as wealthy Nepalese seek a safe haven for their money — and themselves.
“Many people tell us that it is not safe outside the capital and that they live in constant fear,” said Subba, who believes insecurity and investment are the two biggest drivers of the capital’s housing market. “People see property as a good investment opportunity.”
Kathmandu’s population exploded during the decade-long civil war between the Maoists and the army as people flocked to the relative safety of the capital.
The influx pushed up land values in the city. The Nepal Land and Housing Association, which groups many of the country’s estate agents, said land prices have risen by 300 percent since the height of the Maoist insurgency in 2003.
“Land became a valuable commodity,” said Chiranjibi Subedi, the government’s top planning official for Kathmandu.
Subedi said the influx had continued since the end of the conflict in 2006, with many property buyers citing continued instability in their home districts as their primary reason for moving to the capital.
“Insecurity seems to be the main driver of internal migration into Kathmandu since the conflict,” he said. “The number of proposals for new high-rise buildings and apartment complexes just keeps on growing.”
Government figures show the number of new apartments built in Kathmandu rose more than three-fold last year to 3,385 from 1,088 in 2007, as high land prices and poorly enforced planning laws made building upward more attractive.
There are currently more than 250 high-rise blocks being built in the capital, the planning ministry said.
Wealthier residents are increasingly opting for apartments over houses, citing security and ease, despite prices of up to 12,000 rupees per square foot (US$1,700 per square meter) in one of the world’s poorest countries.
“The building is guarded and you can trust the neighbors. It’s also convenient because you don’t have to worry about maintenance,” said Juna Manandhar, 35, who lives in an apartment block in an upscale area of Kathmandu.
For Dinesh Shrestha, 29, owning an apartment offers “a blend of privacy and community,” and is also an investment.
“Land prices never go down,” he said.
Shangri-La’s Subba said many of her company’s apartments were being snapped up by Nepalese people living abroad who, similarly, view them as a good investment.
But some experts believe prices are now simply too high to be sustainable.
“The real estate boom in Nepal is purely speculative,” said Sandeep Gautam, editor of the English-language monthly New Business Age. “The economy is shrinking and people’s purchasing power is declining. [The market] can’t support this kind of aberrant growth in any sector for long.”
Planning official Subedi said 70 percent of apartments in Kathmandu currently stood empty, suggesting those who have bought purely as an investment have been unable to let their properties.
The rise in property prices is fuelled partly by the lack of alternative investment opportunities in Nepal, where political instability has long hampered economic development.
But Gautam says that Nepal’s GDP is falling, and says the country’s banks are too heavily invested in property.
“Some banks have up to 70 percent loan exposure in real estate. The banks have invested in both the buyers and the builders,” he said. “You do the math.”
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