Economic impact of earthquake – Real estate and Infrastructure

Damage to Infrastructure

The full extent of the damage from the earthquake that hit Nepal is not yet known. Early economic damages are currently being estimated at over USD 10 billion. IHS Global insight estimates the cost of rebuilding homes, roads, bridges could cost as much as USD 5 billion or more. This is about a quarter of the country’s GDP (USD 19.2 billion).

Impact to Economy

The earthquake is reported to have damaged 14 hydropower projects resulting in loss of 150 MW of electricity from the country’s power grid. Currently Nepal Electricity Authority (NEA) is distributing 564 MW including 210 MW imported from India.  This would impact the mean energy supply for the country.  As a result manufacturing industries may be severely affected with rising fuel costs to meet energy requirements.

Major highways and bridges connecting districts have not been affected. However road networks in remote districts have been severely disrupted by landslides making transport of relief materials difficult. The situation is likely to worsen with the upcoming monsoons.

Infra Bottlenecks – Impacting Relief

The Air Traffic Control did an amazing job of handling the numerous flights. The Government’s plan of centralized warehouse for distribution of relief materials proved to be an utter failure. The centralized system of relief distribution through state-owned warehouse would have worked if the warehouses were properly functioning prior to the earthquake.


Rebuilding infrastructure will be the next big challenge. Efforts of government institutions, I/NGOs and other stakeholders must be coordinated to facilitate the rebuilding process and avoid over lapping of efforts between the various stakeholders.  Government procurement acts and policies will have to be reviewed in light of the earthquake to avoid delays caused due to political interferences and bureaucracy. A sustained political will is required to make sound infrastructure investments.

Focus on PPP projects

The destruction of infrastructure provides an opportunity to plan afresh better infrastructure. Public –Private – People partnership projects must be initiated post disaster for reconstruction aimed at combining and maximizing the advantages and benefits of including people through sustainable partnership to achieve better planned, executed and sustainable reconstruction.

Quantitative loss

The real estate sector which was on a path to recovery after 5 years of slowdown has been hit hard by the 7.8 magnitude earthquake. The damages and destruction of apartment buildings and houses caused by the earthquake has had a negative impact. The sector could potentially face a slowdown again in the days to come. The devastating earthquake is estimated to have cost the real estate sector at least NPR 7.5 – 8 billion (USD 75 – 80 million). With over NPR 250 billion (USD 2.5 billion) invested in the real estate sector, developers will again have to feel the burn of a downward spiral of the sector.

Rentals and land price movements

The sector is likely to witness an upward demand trend for residential as well as commercial office space.  With thousands of dilapidated buildings, the valley is expected to experience an acute shortage of housing and commercial space. In the short run the supply and demand pressures can lead to increased house prices, rental inflation and potentially hinder the rebuilding process.


The fragility of apartment buildings and residential complexes have made buyers weary as to the quality and safety of living in apartment homes. A shift in the demand from apartment complexes to standalone homes and small plots are expected.


Post-earthquake many developers are likely to face reputational risk as many of the residential complexes and apartments have been severely damaged, some beyond repair.  In the coming months one may witness serious charges of fraud, neglect, fraudulent practices to be levied against developers. The credibility of developers has been well tested during this calamity. Projects which have weathered the earthquake are being seen as developers who can be trusted. These are the developers who will have a lasting impact on the realty sector.

A major portion of the demand for housing will be fueled by the demand for affordable housing. It will be challenging times for developers to meet such a demand when land has been purchased at exorbitant prices.

The earthquake has revealed the importance of public/community spaces as hundreds of people found safety and refuge in these limited spaces. As we move into rebuilding phase it is expected that more emphasis will be laid on preserving and expanding such community spaces.