The interest rate on home loans offered by banks in Nepal has declined to as low as seven percent, amid stagnation in real estate transactions and soaring unused liquidity with financial institutions.
According to Nepal Rastra Bank (NRB), commercial banks are offering home loan rates ranging between 7 percent and 11.99 percent. Banks are also providing various schemes while maintaining relatively constant rates to attract borrowers.
Nepal Investment Mega Bank has offered the lowest fixed interest rate of seven percent on home loans for the period between mid-December and mid-January. Similarly, Everest Bank has offered loans at 7.49 percent, Himalayan Bank at 7.50 percent, while Laxmi Sunrise Bank has set the upper limit at 11.99 percent.
Under NRB regulations, banks can provide long-term credit with either fixed or variable interest rates. Variable rates fluctuate based on economic conditions, while fixed rates carry higher premiums due to increased risk.
Currently, banks face difficulty utilizing their excessive liquidity amid the economic slowdown and slump in the real estate sector. Financial institutions reportedly have Rs 1.1 trillion in idle liquidity, with the base interest rate dropping to as low as four percent per annum.
To support the housing sector, the NRB has relaxed monetary policy for home loans in the current fiscal year. The ceiling for residential construction or purchase loans has been increased from Rs 20 million to Rs 30 million, loan restructuring rules have been eased, and the loan-to-value ratio has been raised to 80 percent for first-time home buyers, and 70 percent for others.
These measures have boosted home loans, particularly in the small-credit segment of up to Rs 30 million. NRB data shows that home loans increased by Rs 44.90 billion over the past year, rising from Rs 397 billion in mid-November 2024 to Rs 442 billion in mid-November 2025.
Meanwhile, small land plot transactions in the Kathmandu Valley also saw an increase, with 51,632 units transacted between mid-November and mid-December, up from 28,383 units the previous month. The government collected Rs 4.84 billion in revenue from these transactions, compared to Rs 3.87 billion in the same period last year.
Bishnu Prasad Ghimire, president of the Nepal Land and Housing Developers’ Federation, said that the real estate market has improved following simplified land plotting procedures and reduced interest rates by banks.
