Thimphu’s big construction boom and its impact

From the dark days of 2012-2014 when even ongoing construction was frozen and loans were not available for the housing and construction sector, Bhutan is now experiencing a big construction boom in the last few years with this year seeking peak construction.

A big part of this construction boom is in Thimphu where strong demand for rental apartments, apartments to buy, office space, shops and hotels has lead to a record number of ongoing and completed construction projects.

As of now, even with all this construction, demand still seems to be strong and ahead of the supply. At the same time this construction boom has prevented rents from sky rocketing as tenants have options.

47 bn worth of construction loans

The monthly financial statistical bulletin by the Royal Monetary Authority (RMA) shows that Nu 24.381 billion (bn) has been provided for building and construction as of April 2018. The December 2017 loan amounts for building and construction stood at Nu 23.4 bn, and in just four months’ time, the amount increased by around Nu 1 bn.

Another area of loans that has to mainly do with construction of hotels is the service and tourism loan which has reached Nu 24.144 bn in April 2018 compared to 22.905 bn in December 2017 an increase of more than Nu 1 bn. The hotels, however, are spread across different Dzongkhags including Thimphu.

This means that construction of private homes, buildings, offices and hotels come to around Nu 47 bn in total.

As of April 2018 the total credit from financial institutions excluding the NPPF comes to Nu 106.7 bn.

One place that is seeing an explosion of building construction is in the capital city of Thimphu from residential buildings to offices to hotels.

In 2016, the Bank of Bhutan (BoB) sanctioned 1,106 housing loan accounts with a portfolio of Nu 5.4 bn.

In 2017 BoB gave 1,424 housing loan accounts with a portfolio of Nu 6.72 bn.

Likewise, in 2018, as of May, 1,673 housing loan accounts were given with a portfolio of Nu 7.87 bn which is 25.76 percent of total loan portfolio.

Almost 50 percent of the housing loans were given for Thimphu.

Demand is strong

The owner of Bhutan Real Estate Company (Hemant Bhutan), Hemant said that there are a lot of constructions taking place in Thimphu, and at the same time there are many who want to buy real estate properties from a real estate company or broker.

An official from Bank of Bhutan (BoB) said that, the price of housing, like the price of any goods or services in a free market, is driven by supply and demand, adding that when the demand increases or supply decreases, the prices go up.

“Prices are on the rise because demand currently outpaces supply. Supply of housing is slow to react to increases in demand because it takes a long time to build a house, and in highly developed areas there simply isn’t any more land to build on. So, if there is a sudden or prolonged increase in demand, prices are sure to rise,” the bank official added.

The bank official said that a housing bubble will only be created when excessive risk-taking becomes pervasive throughout the housing system, and this happens when demand decreases while supply increases, resulting in a fall of prices.

The official, however, did not predict any bubble in the housing sector with demand still being very strong both in terms of people looking for apartments to rent or buy.

Water

An official from Thimphu Thromde said that the development activities and construction boom in Thimphu cannot be stopped.

“With the construction boom, the demand of water supply increases compounded by low yield of water at the source. The demand of water is shooting up while the flow is not even constant, it’s going down,” he added.

The trend of water shortage and crisis in some parts of Thimphu is an ongoing issue. Thromde is currently constructing water treatment plants in Dechencholing and in Chamgang to solve water issue in southern Thimphu.

In anticipation of serious water issue in the core city, the Thromde has come up with a plan to supply water from Dodena and a water plant is being constructed there. “Everyone is after the project knowing the importance of it and we have asked the contractor to try to finish it up before the scheduled time,” he added.

The water source from Dodena will not only help the core city but is will also help in improving the overall water situation within the Thromde. Dodena water source will be distribute to Taba water treatment plant. The 10 million liters a day water treatment plant in Taba will cater Taba, Samteling, Jungshina, Pamtsho, Motithang, Lanjophakha, Yangchenphu, Changjiji and Changzamtog as well.

Sewage

As for increased sewerage issue, the Thromde has calculated the waste based on one person consuming 100 cubic meters of water in a day, which produces 80 cubic meter waste. It doesn’t help that the calculation has to be revised ever so often with the increasing number of housing and people in Thimphu.  Thromde is, therefore, working to extend and increase the current sewerage network and coverage.

“We are also constructing a decentralized sewerage treatment plant. We are done with the construction in Dechencholing and Lanjophakha lower lap. However, we are yet to finish the construction sewerage treatment plant in Taba,” the Thromde official added.

He said that the sewer from lower Motithang and Chubachu areas will be directed all the way across the Wangchu River where a treatment plant is constructed, and for now, the network for the two areas has reached near the MoIC office.

A sewer network for Zilukha is being constructed in the financial year 2018-2019, which will be connected to the treatment plant across the river. In addition, the same treatment plant will cater to Yangchenphu with the coverage extending to upper Motithang in the future.

The money for the Northern Local Area Plan (LAP) sewer works funding comes from the World Bank. The areas like, Taba and upper Lanjophakha will be done by Thromde. “With the on-going sewerage treatment plant in Babesa which is also a part of the treatment plant plan, we feel that we are on track,” the Thromde official said.

However, he added that, much remains to be done in terms of operation and maintenance and also to tackle with overflow of septic tanks in some areas of the city.

Construction Waste

Meanwhile, the chief environment officer of Thimphu Thromde, Yeshi Wangdi, said that when it comes to waste management, they have an immediate problem with a construction boom in capital because there are less people who comply with the rule of dumping construction waste.

In order to avoid any illegal dumping, the officials visit construction sites and brief every people in the labour camp. However, they never listen to what they say, he added. Thereby, he said that, they now tie up with the construction owners and they are made accountable with regard to waste management in the area.

“If their laborers fail to abide by the rule, we will impose fine on the owner, and respectively the owner might cut from their labors’ salary and this is only the way to manage waste in construction site,” he added.

Another issue comes with the illegal soil dumping and that too at odd hours by road side or below roadside, he said. He said that though they have identified two areas; Debsi and Pamtsho for soil dumping, they still have problems with it.

“Recently we had to temporarily close soil dumping area in Debsi as the bridge in Debsi is not so safe to ply over and the dumping space in Pamtsho is exhausted,” he added.

Knowing that, he said recently all the relevant stakeholders (NLC, DoR, DoF, NEC and Dzongkhag) held a joint discussion and they have identified three areas within the city for soil dumping.

Nevertheless, he said that the task forces are reviewing and they are yet to get an approval. “If that gets approved, issue of soil dumping can be solved. When it comes to raw material from construction site, they sell it to scrap dealer and thereby we have no issue with it,” he added.

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