Nepal Rastra Bank to Develop Real Estate Price Index to Address Valuation Gaps

Nepal Rastra Bank (NRB) has initiated the development of a transparent, data-driven "Real Estate Price Index" to address the long-standing challenge of determining accurate property values across the country.

Currently, homebuyers and investors face significant difficulties in ascertaining the true price of land and housing due to varying property characteristics, location, and size, even within the same area. Official transaction records at land revenue offices often underreport sale prices while actual market transactions occur at substantially higher values. This discrepancy has created a lack of reliable information on real estate market conditions, complicating decision-making for both the general public and policymakers.

To resolve this issue, the central bank has begun preparing the index by analyzing nationwide real estate transaction fluctuations. The move aims to measure the true state of the asset market and maintain financial stability. Although NRB currently publishes consumer, wholesale, and national wage indices, the absence of a real estate index—despite the sector’s significant weight in the economy—has left a critical gap in tracking price trends and volatility.

Last week, NRB started publishing real estate transaction trend data based on fiscal year 2020/21 as the base period. The quarterly reports will draw from statistics collected by the Department of Land Management and Archives, the Inland Revenue Department, and the central bank. Following this, the bank plans to roll out the full price index.

“We have released the report to inform the public about current real estate transaction trends,” said Rabindra Marhajan, Deputy Director of NRB’s Research Department. “Our ultimate goal is to publish the real estate price index.”

According to NRB officials, the lack of uniformity in property pricing poses challenges for banking loans, tax determination, and investment decisions. The proposed index will display average price trends based on location, time, and transaction type, aiding government policy formulation and helping individuals make informed investment choices.

The central bank initially began preparations for such an index four years ago, publishing a real estate price survey report in late 2021.

Former Executive Director Dr. Prakash Kumar Shrestha, who once led NRB’s Research Department, noted that constructing the index has been difficult due to Nepal’s complex real estate transactions, frequent price fluctuations, and lack of accurate data. The practice of not disclosing actual transaction prices further complicates efforts.

To develop the index, NRB plans to collaborate with land revenue offices, local governments, banks and financial institutions, and the private sector, utilizing digital transaction data, loan disbursement records, and actual market sale prices.

Dr. Shrestha, also a former vice-chairman of the National Planning Commission, emphasized that real estate is Nepal’s largest asset, and price fluctuations significantly impact the economy. “Most bank loans are collateralized by real estate. A price index is crucial—it influences policy formulation and investment decisions,” he said.

Bishnu Prasad Ghimire, President of the Nepal Land and Housing Development Federation, said the index would help identify arbitrary price hikes, assess credit risks, support policy decisions, and provide market signals to investors. “News reports claim prices are falling, but field realities differ. A price index would help regulate informal pricing and stabilize the market over the long term,” he added.