The housing sector continues to be a major borrower from the financial sector in the country. As of third quarter last year, the financial sector’s total lending to economy reached to about Nu. 44 billion from about Nu. 32 billion in September 2010.
According to the performance report of the financial sectors, housing sector credit continued to lead the sectoral credit concentration of overall total loans and advances with over Nu. 11 billion.
The Works and Human Settlement Minister, Yeshey Zimba, said if the credit trend continues, like any other country Bhutan might experience economic crisis like in the west.
“Here in Bhutan also, the way the credit to the housing sector is increasing at an alarming rate, in fact loan portfolio of most of the financial institutions housing probably would be either biggest or second biggest,” Lyonpo said, adding that it was being extended very liberally and as a result many houses are mushrooming.
Speaking particularly about Thimphu, Lyonpo said that given the limited economic potential, there is possibility of the demand for housing to saturate in distant future. “We can see hundreds of construction and more will come up because land is expensive and at this juncture the real estate business is excellent.”
“So, everybody thinks that you build a house as big as possible, as many rooms as possible you will stand to gain from the housing market. But the danger is that the real estate value I think has been little bit over estimated.”
Lyonpo said that some of the people who have availed themselves of the loan for the housing are already having problem to repay their loans.
“The cost of construction is very high because of this my own worry is that a lot of buildings that are built now or which are going to be built hereafter will definitely face serious problems,” Lyonpo added.
Lyonpo also said, with an additional 200 to 300 buildings in Thimphu, it may reach the saturation point.
