5 Reasons for Increasing House and Land Price in Kathmandu
In this article, we see an overview of the reasons why house and land price in Kathmandu are skyrocketing these days. Anyway, even if this article seems more oriented to the capital of Nepal, it still applies to other cities such including Pokhara, Biratnagar, Butwal, and literally every part of Nepal. It is only that we are using official indicators and studies which were conducted mostly in Kathmandu valley.
Well, here are some reasons for increasing house and land price in Nepal.
See Also: How to Start Investing in Nepal in Real Estate
The first reason is the inflation of cash. Inflation is when a currency’s power decreases, so things become more expensive. The increasing dollar price is a good indication of Nepali currency being weaker on the global scale.
There are many reasons for inflation including unbalanced import/ export rate, budget deficits, unemployment problem, etc. Adding on to that, the price inflation in Nepal is directly proportional to that in India. Hence, Nepali Ruppess losing its worth every day is one of the many reasons for increasing house and land price in Kathmandu.
Supply and Demand
Here is the number. According to the Nepal Land Housing Developers Association, the annual demand for houses in Nepal is 140,000 units. Among that, 42% of the demand is in the Kathmandu valley. However, on average, we are only being able to build about 25,000 units.
The demand for houses in Kathmandu and other parts of Nepal is very high. However, there is not enough workforce and resources to fulfill all of it. Thus, the number of houses we construct cannot compare to the number we need. According to the supply-demand economic model, demand never decreases. But, supply does, and when there is a limited supply, things become more valuable and price rises.
Broker Culture in Nepal
This one more or less has contributed to both, increasing house price and skyrocketing land price in Nepal. Many people don’t know about the concept of registered real estate agents. Due to this, they work with a local broker whose commission rates are far too excessive be called economical.
As the system becomes more unmanaged, prices will increase. The situation is almost so bad in Nepal that people honestly believe that overpaying agents is a must in the real estate market. So, as of now, it is vital for the Nepali population to understand the importance of working with registered real estate agencies.
Increasing Tax Rates
This one can’t be neglected. The sales tax rate is rising in Nepal despite the inflation, and due to which resources needed to construct house become expensive. The same goes for the service rate and labor rate. As everyone working to build a house needs to pay more tax, the price that you need to pay to them is more.
No Value Determiner
The price of a house in Kathmandu is purely based on instincts. There is no official factor to determine the amount, and it’s all about how much the people think the value might be. Or more accurately, the highest price in which a neighbor sold a house becomes the ‘official price’ in a region.
Due to there being no official value indicators, the price of house and land in Kathmandu are always increasing. However, this is set to change in the coming days. It seems that the government is becoming more aware of the fact that the country needs a scale to measure the price of real estate.
As we were talking about the supply and demand before, we could tailor the growing population at the same point. However, the population increase in a place affects the real estate price so much that we need to discuss it separately. According to the Nepal census, the population increase rate in Kathmandu is 6.67% per annum.
This means the demand for houses is increasing every year in Nepal. And now you know, according to the supply and demand model, it is only practical that homes become more expensive in Nepal.
Well, the above were the reasons for the increasing cost of land and houses in Nepal. You can contact us if you want to know land and house price in Kathmandu in different places. We can help you with the right consultancy and accurate evaluation.
Also, you can visit our listings to find some of the hottest deals in houses and land in Nepal.