Can a fi nancial bubble burst if no one hears the pop? Transparency, debt, and the control of price in the Kathmandu land market Andrew Haxby Abstract: Th is article concerns the formation of price in Kathmandu’s land market. In Nepal, land has been for generations the bedrock of savings and household fi nance, an objectifi cation of social status and a subject of intense political debate, up to and including the recent Maoist insurrection. In Kathmandu, however, the meaning of land has begun to change, mostly because of the rapid fl uctuations in its monetary value. Th is article demonstrates how residents have used localized understandings of price and value formation to explain these changes, under- standings that take as their reference point historical landlord-tenant relationships and not the machinations of market equilibrium. Th is article interrogates the no- tion that the market animates price, instead arguing that price can index a multi- tude of value formations. Keywords: economic anthropology, informal economy, land tenure, money, price In the summer of 2011, I interviewed a man in taken loans from the banks and who had to sell a town on the northern ridge of the Kathmandu to make their payments—that was worth less Valley. Th is man was a young father of two, a lo- now. cal to the area and of the Tamang ethnic group. Th is article is an attempt to explore the full Like many, he had engaged in land speculation meaning of this man’s assertion, an assertion during a recent housing bubble, which had left he was not alone in making. During numerous him with investments he could not sell now that conversations with local brokers, homeowners, the bubble had collapsed. Yet, unlike many, he and developers, I heard this argument repeat- had managed to buy land without loans and was edly: that aft er the bubble collapsed, land prices in no rush to divest. I asked if he believed the only fell for those who had loans to banks and price of his land was lower than it was before thus were forced to sell. Th is argument dove- the bubble burst. He paused before saying no; tailed with another peculiarity I repeatedly came his land was still worth exactly what he had paid across in interviews with landowners and other for it. It was other people’s land—those who had residents of Kathmandu: despite being told re- Focaal—Journal of Global and Historical Anthropology 78 (2017): 77–89 © Stichting Focaal and Berghahn Books doi:10.3167/fcl.2017.780107 78 | Andrew Haxby peatedly by bankers, government regulators, informal brokers as they negotiated land deals.1 and economists that land prices had fallen sig- Th ough my interviews with banking offi cials nifi cantly aft er a period of reckless speculation, and government offi cials gave me access to the few individuals outside of these groups seemed higher echelons of Kathmandu fi nance, most of to believe that the price of land had decreased at my research was conducted within smaller, more all. Instead, they simply stated that people had informal markets, ones populated by household- stopped buying land, thanks in part to changes ers, small-time developers, and brokers. in banking regulations. Business had stopped, Th is article should be taken as suggestive that much was clear. But land prices had not gone rather than defi nitive, an attempt to undermine down because, according to these informants, price’s universal economic defi nition in order to land prices never go down in Kathmandu. reveal its composite nature (Guyer 2009: 203). Financial bubbles rest on the assumption of First, I outline the recent history of the Kath- price equilibrium: that in a functioning market, mandu land bubble, focusing on the involve- a commodity’s price will naturally trend toward ment of commercial banks. Next, I discuss the a balancing of supply and demand (e.g., Fried- current structure of Kathmandu’s land market in man 1976; Kindleberger and Aliber 1978). A relation to recent writings on the performativity bubble happens when overly available credit of markets. Finally, I present a brief synopsis temporally infl ates demand for a certain com- of Nepal’s history of land tenancy, focusing on modity (or set of commodities), supplanting how land’s economic value has historically been the commodity’s “real” price with a fi ctitious, controlled by a landlord class. Th is history gives overvalued one. A bubble ends when a process precedent to the relationship between landown- of devaluation or “correction” returns the com- ers and commercial banks, providing the proper modity’s price to its equilibrium. From this per- context to the man’s above proclamation about spective, these informants’ insistence that land the price of his land. I end by suggesting that prices had not dropped was simply a matter of equilibrium may not be as universally central denial. As one Nepali economist told me, what to the conceptions of price as is sometimes as- I was hearing were “fantasy prices,” with no ba- sumed, while also questioning the future mean- sis in the real economy. However, in this arti- ings of price in Kathmandu. cle I resist taking these informants’ opinions as simply a sign of ignorance. Rather, I argue that their perception of price dynamics reveals a nu- Th e bubble anced understanding of land’s economic value in Kathmandu, both in terms of the market’s Th e story of this housing bubble begins with current structure and in terms of Nepal’s history Nepal’s formal fi nancial institutions. During the of land tenure. 1990s, Nepal followed India’s lead and liberal- Th is article is based on two years of fi eld- ized its banking policy, relaxing the state’s mo- work conducted from 2012 to 2016. During this nopoly on high fi nance (Khanal et al. 2005). time, I conducted more than 50 interviews with Between 1990 and 2010, the number of govern- offi cials at commercial banks, fi nancial com- ment-regulated fi nancial institutions rose from panies, and microfi nance cooperatives, current 8 to 263 (Ozaki 2014). Much of this period of and for mer government regulatory offi cials, pro- fi nancial expansion overlapped with Nepal’s civil fessional property evaluators, individual home- war (1996–2006). As the war gutted other in- owners, land developers, land brokers, and li- dustries throughout Nepal, Nepali fi nancial in- censed paralegals who prepare documents for stitutions managed to fi nd ample business in less land transfers. I also conducted workplace ob- aff ected sectors, particularly in remittances sent servation at a fi nance company that specialized from Nepalis working abroad. When the bubble in housing loans, at a commercial bank, and with began to collapse at the end of 2009, remittances Can a fi nancial bubble burst if no one hears the pop? | 79 were 20 percent of Nepal’s gross domestic prod- a family years to raise funds to build a house, uct (GDP) (Gautam 2011: 25) and, according to with many families opting to add fl oors as they banking offi cials I interviewed, accounted for can aff ord to do so, this form of development the vast majority of the banks’ liquidity. was extremely popular. Both these high-end Th us, when the war’s end opened the door realtors and lower-end plotters also acted as to more brazen forms of fi nancial investment, conduits for fi nance, off ering their connections Nepali banks were well positioned to take ad- with fi nancial institutions—oft en the very insti- vantage. Th e country, however, was still in sham- tution from which they had borrowed—to help bles, with few sectors able to absorb the banks’ arrange loans for the purchasing family, thereby capital. With nowhere to invest, many people moving their debt to their clients. dumped their capital into the Nepali stock mar- Th e popularity of both these development ket, oft en buying stock in newly opened fi nan- strategies helped to heat up the land market. cial institutions. Th is strategy only increased the Several reports found that from 2006 to 2009 need for other forms of investment outside of the price of land increased 300 to 400 percent in fi nancial institutions. the areas just outside Kathmandu’s urban center Th e solution for many was the real estate (Nelson 2013; Shrestha 2011). Likewise, I heard market in and around urban areas, particularly reports in northern Kathmandu of land prices in the Kathmandu Valley. Th ough Nepal’s cap- increasing upward of 10 times their original ital city had been expanding quickly since the value, the price of a single aanaa (roughly 32 1950s (Manandhar and Ranjitkar 1981), it wit- square meters) increasing 100,000 NRs (roughly nessed unprecedented growth during the war $12,000) every month. Not only did prices in- years as families fl ed to the city for security and crease, so did the frequency of sales. Between economic opportunity. Th ough Kathmandu is the fi scal years 2007/2008 and 2008/2009, the estimated to have grown 45 percent between number of recorded land transactions in and 1995 and 2005, such numbers are probably an around Kathmandu’s urban centers almost dou- underestimate, counting only those who regis- bled (Sharma 2009). tered their move with the government (Muzzini As the prices increased, so did the credit op- and Aparicio 2013). Th is population shift accel- tions. Rotating credit schemes called d. hukut.is erated the transformation of Kathmandu’s agri- raised their monthly payments upward of 10 cultural areas into residential housing, creating times their original amount so that the monthly lucrative investment opportunities for the fi nan- recipients could receive payouts large enough to cial sector.