High real estate prices in Thimphu despite COVID-19 impact and sluggish demand

As per most of real estate firms within the country, there has been a significant increase in demand for land and real estate properties in the capital since the pandemic, although some firms stated that it is a matter of individual connection, promotion and valuation of the deals.

Despite the high valuation of such properties, especially in Thimphu, most people still seek to buy lands, flats and other properties in the capital.

 CEO at Wrap Bhutan, Kezang, said that the prices normally go up every year due to the scarcity of land in the capital. He said, “This year, prices at Olakha have seared up to Nu 1.3 million (mn) to Nu 1.4 mn per decimal from that of Nu 1.15 mn to Nu 1.2 mn per decimal last year.

Similarly in Khasadrapchu, land is currently valued in between Nu 280,000 to Nu 300,000.

In Semtokha from a peak of Nu 400,000 last year, it has reached in between Nu 500,000 to Nu 600,000 and for Debsi area it has increased from a peak of Nu 400,000 per decimal last year to Nu 700,000 this year.”

A Realtor, Hemant Bhutan, said that the price for the land and other property, like buildings, flat and duplex have really gone high due to lesser supply, especially in the capital.

He added, “One of the main reasons for such a price rise is due to people working abroad who have spoiled the land price value since they have huge income sources which plays a big role in the real estate price mechanism.”

According to Hemant Bhutan, people of other districts as well as those in Thimphu mostly opt to buy properties that are within the capital, and do not demand for land elsewhere as much.

Realtor at All Sky Real Estate believes that there has been a decline in the demand for real estate properties. Currently, since 80-90 percent of their buyers used to be the Bhutanese residing in Australia, and since their jobs have been affected by the COVID-19 pandemic, he feels that their purchasing power has been lowered.

He also said that there has not been a change in the rate of price increase in Thimphu, especially because there is minimal supply of land.

He added, “Land price in Thimphu is very high while the land price in Gelephu and Paro have remained the same.”

He cited example for Simtokha E4 area to have been around Nu 500,000 to Nu 550,000 per decimal before the COVID-19, which this year has escalated to around Nu 650,000 per decimal.

He said that there will be constant increase in the price of land, especially in the capital city because of the higher demand and lesser land availability.

 The senior manager at Dorji Brokerage said that the rate of increase in land price has decreased by a few percent due to the COVID-19 pandemic, since there is lesser purchasing power for the Bhutanese at the moment. But in terms of some real estate getting more business, he feels that it might have been through individual connections, especially by targeting Bhutanese residing or returning from Australia.

He cited an example of Olakha area, which was valued in between Nu 1.5 mn to Nu 1.6 mn per decimal last year, and has now decreased to Nu 1.2 mn to Nu 1.3 mn. In terms of Namseling area along the highway, he said that in his case it used to be valued in between Nu 500,000 to Nu 600,000 and is now in between Nu 450,000 to Nu 500,000.

He said, “The price for land increases as one moves towards the capital. For example, areas near the welcome gate would roughly be valued at Nu 550,000 and towards Babesa, up and down, in between Nu 800,000 to Nu 1 mn Serbithang area in between Nu 560,000 till Nu 600,000”.

He added, “The Olakha area around the Expressway is very expensive. Just last year, one of my clients sold her land at Nu 1.6 mn per decimal.”

   Zhonnu Bhutan real estate personnel said that there has not been a direct effect in terms of price of land in Thimphu, but the demand has lowered and even his prospective clients who are the Bhutanese residing in Australia, bargained for lower prices, having a notion for a fall in price due to the COVID-19 pandemic.

He said, “Before last year, I had negotiated lands at Debsi in between Nu 350,000 to Nu 400,000 per decimal, but prices currently are at around Nu 750,000 to Nu 800,000 in the same area. For land in Samtenling, I had transacted it for around Nu 450,000 per decimal before the COVID-19, but now it is valued in between Nu 700,000 to Nu 850,000.”

He added that sometimes he bargains with the owners’ price quoted if it is unreasonable. But some of the factors for such rise are the buyers, especially from Australia, who do not inspect properly, and also at times, some of the realtors hike the prices, he said.

 Sonam Dorji, who is a realtor for Samling Real Estate in Phuentsholing, said that the demand for real estate has been on the low, however, despite the low demand, prices and supply for land and real estate items have remained as usual as that of the pre-CVOID-19 pandemic.

He said that the factors that determine the price of real estate products in Bhutan are the Bhutan PAVA rate, the government’s rate at which the properties would be compensated and the bank valuation of the property.

He said, “The buyers mainly refer to the bank’s property valuation, and since all financial institutions have different rates, a higher bank valuation means a higher market for the product.” He added that the property and sales tax which is at 3 percent, as per the revised 2020 Act, the high taxation also lowers demand for buyers as well as sellers.

He said that out of the other banks, he prefers the rate of Bank of Bhutan and Punjab National Bank since they keep it at par with the PAVA rate.

He cited example for Toribari area in Phuentsholing stating that the price last year as per the market rate was in between Nu 250,000 to Nu 300,000 per decimal, but at this moment it has been a struggle to even sell it at Nu 200,000.

“Other areas like Kabraytar in Phuentsholing is valued at Nu 650,000 per decimal and for the core town area it is valued at Nu 450,000 as per the government.”

In terms of Tading Gewog area he said that there has been a slight increase in the price in relation to the COVID-19 pandemic since earlier the commuters relied on the Indian routes but now commuters from Haa, Dorokha and Samtse have been directed towards that area, and there has been slight increase in business. He said that last year the area was valued at Nu 50,000 to 75,000 per decimal, but it has increased till around Nu 100,000 per decimal, also adding to the factors contributing to the increase, the connection for proper infrastructures and the Amochhu project being established nearby.

However, he said that after the COVID-19 pandemic he has not made any land transactions.

He said that the demand has been dormant, or at one point even completely paralyzed due to the pandemic, although the supply for real estate properties remained normal.

He added, “A main catalyst for change in the real estate business is due to restrictions from financial institutions for sanctioning loans, another factor is inactivity of construction sectors due to the pandemic, and lastly I believe the demand by those having surplus money have declined due to lesser spending power at this time.”

 Bhutan Raymenta Land Transaction realtor said that there cannot be a fixed determinant in terms of pricing since it depends on the site, area, strategic placement of land and also the sellers who do follow PAVA rate for land, which is monitored by the Ministry of Finance. He said that unrelated to the pricing, he did notice an increasing demand for land.

He said, “We have done over a thousand transactions for land, and we found that most of them were interested for the sale and purchase of land.” He said that recently, people have been shifting their purchases towards rural areas in hopes of future prospects and developments. 

As for Gelephu, a realtor, Bhola Nath Sharma, said that there has been comparatively lesser buyers after the COVID-19 pandemic, and that there are many transaction that happen personally.

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