This is how collateral is evaluated in Nepal
Mandatory collateral is required when taking a loan from a bank. Banks have been keeping property collateral with customers to secure their loans. The customer can mortgage the house or land as collateral. Loans can also be taken from some banks by pledging shares and gold and silver. In terms of house construction, the fair market value of the land and the estimated cost of the house remain as collateral.
If you are going to take a home loan from a bank, it is important to know the approximate valuation of the pledged property. The bank decides how much to lend based on the same value.
Property valuation is an important issue when it comes to real estate loans. Banks hire engineers to evaluate collateral. All three engineers make field visits to assess the property, understand the market value, and evaluate the collateral.
How is the assessment done?
All banks have their own policy. They have their own unlisted panel of valuers. Valuers derive fair market value from government valuation and market value. And, 50 to 70 percent of the same fair market value flows into debt.
If the government valuation of your property is Rs 30 lakh and the current value is Rs 1 crore, then 30 percent of the government valuation will be Rs 9,00,000 and 70 percent of the current value will be Rs 70 lakh. Now your fair market value is 9 + 70 = 79 lakh rupees. About 50 to 70 percent of the same amount is available for home loan.
Engineers evaluate real estate independently. Banks are not allowed to interfere with this. Engineers take the bank staff with them to the site and inspect the house and land. They understand the value of movement. The assessment is done by the Land Revenue Office. And, derives fair market value from government valuation and market prices. When valuing real estate, the current price is looked at more.
The government’s valuation of real estate is lower than the current market price. It is decided by the Land Revenue Office to look after the areas related to government assessment. The market price is determined on the basis of buying and selling. Generally, banks derive fair market value from 30 percent of government valuation and 70 percent of market value. The bank’s policy may be different in this too. For example, some banks may calculate an average of 20 percent of the government’s valuation and 80 percent of the market value. Some are valuing the property on the basis of 10-90 percent.
If the government valuation of your property is Rs 30 lakh and the current value is Rs 1 crore, then 30 percent of the government valuation will be Rs 900,000 and 70 percent of the current value will be Rs 70 lakh.
Now your fair market value is 9 + 70 = 79 lakh rupees. About 50 to 70 percent of the same amount is available for home loan.
There is a slightly different policy when it comes to house building. If you are looking for a loan to build a house in a bank, you can get a loan by pledging the fair market value of the land to be built (which is assessed as above) and the estimated cost of the house to be built (the cost of building a house according to the house design is calculated by the engineer). The house design map must be certified by the ward office of the municipality concerned. That is, approval must be obtained for the construction of the house by crossing the map.
For example, the estimated value of the land you are going to build is Rs. 79 lakhs and it will cost Rs. 1 crore to build a house. Now you can keep Rs. 1.79 crore as your security. You get 50 to 70 percent of this loan of Rs 1.79 crore.