Construction sectors are gradually attracting investment in the recent years. Financial institutions have been lending credit to construction and real estate sectors. The total disbursement of credit on construction sector is escalating from previous year’s status by a huge amount.
According to the statistics from Nepal Rastra Bank (NRB), Rs 214.9 billion worth has been distributed in the first nine months of fiscal 2016-2017, which is 17.5 percent more than what it was in the previous year. The total amount for the previous year was Rs 182.8 billion. Further study reveals that majority of the credit provided by funding institutions in that sector fall on heavy construction projects like bridges and roads. Central Bank’s data shows that these construction projects received Rs 24.85 billion in the first nine months of the ongoing fiscal year compared to Rs 19.6 billion of the previous year’s data.
For the first nine months of 2016-17 credit flow in residential construction stands at Rs 175 billion. It was Rs 149.5 billion for the same period last year. Also, BFIs increased credit worth Rs 14.8 billion in non-residential construction between mid-July and mid-April this fiscal year which was a billion less in the previous year. The disbursement of credit in these sectors has gradually increased through the years. There are several factors that enforce credit escalations. Change in government policies and availability of investment opportunities in these sectors for buyers and entrepreneurs alike are some of the reasons.
NRB data shows that BFIs have extended Rs 62.3 million housing loan earthquake victims at a concessional interest rate of two percent until mid-April this year. The zero percent interest rate on refinancing facility has encouraged BFIs to flow credit in the construction sector.
The demand for credit in the construction sector is on the rise with a substantial amount. Also, the work relating to construction activities are picking pace in juxtaposition. Although policies and other defiant factors affect companies and their working schemes, construction activities are likely to increase in the future along with the credit to it’s accord.
