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Impact of Covid-19 on Real Estate Business of Nepal

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The first detected in China, COVID-19, popularly known as the coronavirus has spread all over the world. As the whole world is in lockdown, the economic condition seems to degrade. Various businesses involving tourism, manufacturing, construction, real estate have dropped low due to the impact of Covid-19. The number of corona cases is increasing rapidly in Nepal too. This has brought a negative impact in the real estate business as people are not able to go for a site visit and there has been in decrease in sell.

Import/Export

Nepal is dependent on India and China for raw materials like iron and steel. It is difficult to import these materials from the neighboring countries during this time of crisis. The existing supply system has been interrupted and the scant network is not able to manage in active labor and other resources. 

Import and Export

Labor

The impact of Covid-19 has seen mostly on people who are daily wage earners and laborers. As there is no work, these people are suffering a lot. Most of them have returned to their villages. The government is not able to provide proper help. So, as there is a lack of laborers, there is a negative effect on the development of new infrastructure.

Labor

Cash flow Constraint

Due to the Impact of Covid-19, the sales speed is weak and travel has been restricted. Hence it has negatively affected the cash flow in the residential, hospitality, and retail sectors. Evidently, the economy of Nepal mostly depends upon remittance and tourism. However, COVID-19 not only weakens the immune system but the economic condition of the state as well. As the economy weakens, the real estate business is likely to slow down.

Cash-Flow Constraint

Effect on Demand and Supply 

Real estate is a good economic option for investment by people. However, people’s incomes have dropped low due to the pandemic, and investment in the residential sector has declined. Also, the supply side of the house is on the rise and the demand side is on the decline, and experts predict that this will happen in the long run.

Consumer Sentiment

The pandemic has changed the way we live. In fact, tourism, remittances, and production have slowed down and there is a change in the habits of consumers due to the closure of these industries. They are in a state of confusion as there is a change in the way they spend and invest. Moreover, people’s involvement in areas other than the usual routine items and medicines has plummeted.

Existing Project and Potential Impact

The distribution of resources in the unfinished projects has been postponed as the construction of unfinished projects has come to a standstill across the country after the lockdown. Furthermore, the cost of raw materials is expected to increase due to the difficulty in importing steel, cement, and other equipment from China and India. Though there is no proper income, traders and manufacturers are coerced to pay taxes which is another problem. Since, there may be a lack of labor force, post-pandemic, which will adversely affect the prevailing liquidity.

Source: Nepal Rastra Bank

A very high rate of real estate transactions was evident in cities like Kathmandu, Biratnagar, etc.  However, due to the pandemic, these economic transactions are declining as it is impossible to buy and sell at the same rate as before. 


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