The Bhutanese Leading the way.
Thimphu, the capital city, once flooded with tenants in search of empty apartments is now faced with another challenge, a complete reverse of the earlier scenario.
With buildings mushrooming everywhere from the city’s heart to its outskirts, many new vacant apartments are now lying unoccupied after months of its completion.
The city known to be experiencing the worst housing crunch is now coming around with buildings surpassing the number of occupants. This is evident from the dozens of new apartments remaining unoccupied in Babesa, Olokha, Dechencholing, Motithang, Changzamtog, and other parts of the city.
Landlords have failed to attract tenants despite numerous efforts while during the earlier days, tenants would take months and years to look for an empty house to rent, but buildings would be reserved by tenants even before the construction works began.
The problem is more serious, especially along the suburban areas such as Babesa, Olakha, Semtokha in the south and Taba and Dechencholing in the north. Building owners in the core city areas aren’t hit as yet.
The trend is proving to be disastrous for private home builders because constructing a building for or buying a plot of land in Thimphu costs a fortune.
The land prices and the cost of constructions have sky rocketed over the years. Hence, many take huge risk by constructing a building hoping to earn through rental income in the long run.
Many also avail loans from the financial institutions repayable over a long period of time. But when there is no source of income to repay the loan, house owners are bound to default on the repayment of loans.
“We took loans to construct a building and now we face difficulties to pay back with our apartments remaining vacant,” said Tshering who owns a building in Olakha. Her flats have remained vacant ever since the construction completed a few months ago.
One of the main reasons cited for the problem is the high rental charges levied by house owners in the absence of regular inspection and rigid policies by authorities.
Tshering has managed not to default the loan repayment for now. “With no earning from the building, I have been paying loan from my own pocket for few months,” she said. Tshering charges Nu 12,000 per month for a three bedroom flat, depending on the quality of the rooms. “Few tenants that come enquiring about empty apartments shy away saying it is expensive. Many don’t look into the quality of the apartment.”
She added that if she does not charge the set amount then she cannot meet the loan amount. She also said being at the outskirts of city, the location is not good enough for attracting the big institutions, offices, and agencies that could afford the rent she is charging.
“They are concentrated mostly in the core of the town and people prefer to rent house nearby their working place.” However, she suggested that it would help decongestion if they are spread across the capital.
A landlord in Taba is lucky enough to have been able to rent at least half his building. His apartments with three bed rooms were rented out for Nu 8,000 initially but he had to bring down the amount since there were no takers.
He was compelled to rent out his apartments for Nu 7,000 to 7,500 depending upon the size and facilities of the units. Although it was a loss for him to bring down the rent, he failed to attract enough tenants to fill his building space.
But he said the bargain helped secure few renters. “After reducing the rent, few renters came looking for the flat, else the building would remain empty,” said Bhanu.
Bhanu’s building was completed last September and he has still to rope in tenants to the optimum capacity. He too had to pay the loan from his personal savings. If the loan repayment is lapsed, he said, the financial institutions will reprimand them.
Meanwhile, another building owner in Babesa said his five-storied building did not attract any tenants, and rather caused him a huge loss. Having remained vacant from the day of its completion, he said paying the loan is difficult for him.
“Earlier there was lack of empty apartments, but now there is lack of occupants,” he said. “Now the situation is getting reversed and constructing apartment is turning into a risky business.”
According to the tenants, it is the construction boom that is to be blamed. Many said that buildings started to sprout randomly over the last few years. No one really studied the potential of the tenants, instead citing the housing crunch as a lucrative opportunity, and everyone ventured into it.
Another reason many tenants cited is the rental charges. While there are many people still looking for a good home to rent, they are left with no choice due to exorbitant rental prices. “Many new apartments, though available for rent is too costly,” said Tashi Gyeltshen who is still looking for an affordable apartment. The main reasons for the mismatch in the number of apartments available and the tenants are the high rental charge, and most apartments are located far away from the work place, town and institutions.
In addition, economic stagnation is another factor responsible for such gap while affordability of low income people to rent good house is another issue. Many people from the low income bracket are either put up in government or prefer to rent small and cheap apartments.
There are other petty reasons such as troublesome landlords who impose many restrictions when renting out a flat. The safety is also another factor that determines the tenants willing to occupy, in addition to good parking space.
Meanwhile the marketing head with Gyelsa Tewa Real Estate Developers Pvt. Ltd., Sunita Gurung said that under their project such difficulty is not encountered in pre-selling the buildings, instead they are constructing a number of luxury duplexes, commercial, residential and budget apartment complexes.
