URBAN SETTLEMENT

Urban Settlement
Nepal is one of the ten least urbanised countries in the world. However, it is also one of the top
ten fastest urbanising countries. In 2018, the level of urbanisation was 19.74 per cent, with an
urban population of 5,544,000.

For the period 2014- 2050, Nepal will remain amongst the top ten fastest urbanising countries
in the world with a projected annual urbanisation rate of 1.9 per cent. Urbanisation in Nepal is
dominated by a few large and medium cities with an excessive population concentration in the
Kathmandu Valley.

High urban growth is occurring in the Kathmandu Valley, the Pokhara Valley, the Inner Terai
valleys, and in market and border towns located on highway junctures between the east-west
highway and the five main north-south corridors. Urban growth centres are also emerging close
to the border with India.

Although the urban growth rate in Nepal is high, population distribution across urban areas
remains uneven. Among all the urban centres, Kathmandu Valley is the hub of the country’s
urbanisation, according to the report. With a population over 1 million, Kathmandu city alone
recorded the highest density of 19,726 persons per sq km in 2011.

“There is imbalance in the distribution of urban population both among development regions
and ecological regions, making management of population growth very difficult for the
concerned municipalities with limited resources. Among the three ecological regions, the level
of urbanisation is the highest in the hill region (21.7 per cent) compared to Terai (15.1 per cent)
and the mountains (2.8 per cent).

Among the five development regions, the Central Development Region has the highest level of
urbanisation of 23.5 per cent followed by the Eastern Development Region and Western
Development Region, both accounting for 17-18 per cent each. Share of urban population in
the remaining two development regions is relatively low.

During the last few decades, most of the efforts to manage rapid urban growth caused by
internal migration and natural growth were limited to Kathmandu Valley and a few other towns
with better economic opportunities and administrative services.

Urbanization brings with itself many challenges as well as opportunities. In this report we have
assessed two businesses as can be observed in the table below.
S.N. Sector Possible Venture Ventures Under Consideration

i. Urban Settlement Green Buildings Green Buildings

ii. Waste Water Treatment Waste Water Treatment

iii. Home Bio-Gas Systems
iv. Smart Parking

v. Smart Cities
Table 1 Assessment of Different Sectors to Feature in this Report.

1 Green Buildings
1.1. Macro-Economic Outlook and Indicators

1.1.1 Industry Landscape

Global population has increased significantly in the last decades and so has the expectation of
living standards. It is predicted that around 70% of the world population will live in urban areas
by the year 2050. At present cities consume 75% of the world’s resources and energy which
leads to the generation of 80% of greenhouse gases. Thus, in the next few decades there can be
severe negative impact on the environment. This makes the concept of smart cities a necessity.

The creation of smart cities is a natural strategy to mitigate the problems emerging by rapid
urbanization and urban population growth. Smart cities, in spite of the costs associated, once
implemented can reduce energy consumption, water consumption, carbon emissions,
transportation requirements, and city waste. In other words, in a smart city, the digital
technologies translate into better public services for inhabitants, and for better use of resources
while impacting the environment less. One of the formal definitions of the smart city is the
following: A city connecting the physical infrastructure, the information-technology
infrastructure, the social infrastructure, and the business infrastructure to leverage the
collective intelligence of the city.

Any combination of various smart components can make cities smart. A city need not have all
the components to be labelled as smart. The number of smart components depends on the cost
and available technology

A smart city can make smart reactions to various types of requirements including daily lifestyle,
environment protection, public security and safety, basic services, industrial and business
administrations. The goal of smart city effective and efficient utilization of resources and
provide better services to its citizens. For older cities, it includes redesigning of infrastructures,
utilities and services and including innovation based particularly keen framework-based
applications.

Green buildings are a crucial constituent of smart cities. It is a preliminary requirement in the
process of achieving a smart city. Highlighted below is some necessary information regarding
Green Buildings.

The global green buildings market is likely to expand at a CAGR of 10.26% over the forecast
period (2018-2023), predicts Market Research Future (MRFR) in its latest study. The report
incorporates various macro and micro-economic factors which would impact the market over
the forecast period.

Within the context of significant environmental deterioration, the need for sustainable and eco-
friendly solutions has increased remarkably. Green buildings have been the apt response of the
construction industry for acute energy minimization and sustainability goals, which has become
the need of the hour. They use less water, minimize waste production, increase energy
efficiency, and create a healthy ambience for living. There has been a spiralling rise in the
interest of green buildings among builders as well as consumers.

Intensifying emphasis on sustainability along with the acute need to reduce carbon footprint
are the key factors which are motivating the growth of the green building market. In developed
countries like the U.S., there has been a massive shift from traditional buildings to green
buildings. Increasing urbanization and commitments on an international level to curtail harmful
emissions are acting as tailwinds to the market growth.

Global warming has become a reason for concern, and various regulatory bodies are enacting
laws which would promote green buildings. The governments in multiple countries are taking
concrete steps to encourage building with green components. Green buildings reduce carbon
emission by 34% and consume 25% less energy than the conventional buildings which are major
factor for their massive popularity. Moreover, the higher resale value of green buildings acts as
incentives for builders as they can charge higher for green building properties.

On the contrary, green building construction involves obtaining Leadership in Energy and
Environmental Design (LEED) certification which is a tedious affair. Moreover, all green
components such as ventilation control, lighting control, temperature control, and abundant
day lighting raise the cost of building which might stand as an impediment to the market
growth. Furthermore, lack of expertise also remains a possible bottleneck.
The global Green Building Market has been assessed on the basis of product and application.

By product, the green building market has been segmented into exterior products and interior
products. The exterior products segment has been further segmented into smart lighting, HVAC
systems, solar products, building systems, and others. The interior products segment has been
further segmented into roofing and flooring.

The exterior products segment is dominating the market and accounts for the majority share of
79.6% of the global market. The segment is expected to reach a market valuation of USD
268,573.8 Mn at a CAGR of 10.76% by the end of 2023.

By application, the green building market comprises residential and non-residential. The
residential segment is dominating the market. The segment stood at USD 123,401.5 Mn in 2018
and accounted for almost 60.9% share of the global market. It is anticipated to reach USD
206,855.7 Mn by the end of 2023 at a CAGR of 10.88%; The non-residential segment is likely to
reach USD 121,270 Mn at a CAGR of 9.25% over the forecast period.

The green building market has been segmented into 4 key regions, namely North America, The
Middle East & Africa (MEA), Europe, and Asia Pacific (APAC).

North America is the leading green building market and accounts for 29.41% share of the
market. In 2018, the North America market was valued at USD 59,537 Mn and was likely to
reach USD 99,805.5 Million at a CAGR of 10.89% during the forecast period. Technological
superiority and high level of environmental awareness are driving market growth in North
America.

Europe is the second largest market for green building and was valued at USD 51,030.1 Million
in 2018. As per MRFR's analysis, the Europe market can go up to a valuation of 83,669.1 Million
at a CAGR of 10.39% by the end of the forecast period. Strict government regulations, along
with the availability of technical expertise, are acting as a tailwind for the market growth.

With almost 24.5% share of the global market, the APAC green building market is poised for
remarkable growth. Favourable government policies are favouring the growth of the market
which would help the market achieve a CAGR of 10.09% over the forecast period.

The MEA green building market is also advancing at a CAGR of 9.39% over the forecast period.
The region is more in need of green buildings due to extreme climate conditions most of the
times of the year.
1. 1.2. Contribution of the Sector in the GDP:

According to the Central Bureau of Statistics (CBS), the Nepalese Construction Industry
contributed about 7.7% to the GDP in FY2017/18. It is estimated that this sector is creating
employment opportunities to a million people approximately. It is observed that the
construction sector is one of the significant contributors to the GDP.

However, due to Green Buildings being a new concept very little data is available on the
industry.

1.1.3. Competitive Analysis:

Competitive Forces High Medium Low

Barriers to Entry
Threats of Substitute
Bargaining Power of
Supplier
Bargaining Power of
Customer
Competitive Rivalry
Industry Attractiveness
Table 2 Competitive Analysis Comprising of the Porters 5 Forces Model

Green buildings businesses have neither specific incentives nor barriers for entry. The plus side
is that it is the next step in evolution for construction businesses however; its main concern is
the industry’s cost ineffectiveness in comparison to traditional construction methods and the
long transitioning period before customers fully switching to environmentally friendly options.

1.2. Environmental Suitability

1.2.1. Environmental Approval:

The new Environment Protection Act, 2019 primarily regulates issuance of environmental
clearance related approvals including approval of environmental clearance study i.e. either
environmental impact assessment (EIA) or initial environment examination (IEE). Service
oriented activities as well as assembling activities that emit some level of pollution or that
which affects the environment requires environment clearance in order to operate industrial
plants.

However, it is uncertain whether green buildings business would be required to undertake IEE
or EIA.
The procedure and requirement to obtain environmental clearance will be clarified more in the
soon to be published rules set under Environment Protection Act, until then there is still
regulatory uncertainty for obtaining environmental clearance.

1.2.2 Environmental Appraisal

To better understand the benefits of Green

Buildings to the environment as well as
human well being the case study of the ITC
Green Centre of Gurgoan, India below will
shed further light on the industry.

The ITC Green Centre, is certified as one of

the world's greenest buildings in Asia,
showcasing how such structures can be both
eco-friendly yet commercially viable, even in
a city reeling under acute water scarcity and
sinking groundwater level. Located in
Gurgaon, the building has been awarded the
Platinum Green Building rating by USGBC-LEED (Green Building Council-Leadership in Energy
and Environmental Design), making it the first corporate house in India to bag the award.

The building is designed keeping in mind the highest environmental standards. It is made up of
bricks and concrete comprising of fly-ash and is equipped with high-efficiency equipment that
reduces 53 percent energy consumption over a conventional building and 40 percent potable
water requirements. Zero water discharge, solar thermal technology, storm water management
system, reflective high-albino roof paint, minimal exterior lighting and separate smoking rooms
with exhaust system are some of the other features of the building.

Significantly, the USGBC has re-certified the ITC Green Centre in 2012 as the world's highest
(Platinum) rated green building. Platinum is followed by three other categories, namely Gold,
Silver and Certified. The ITC Green Centre has been meticulously built to promote the highest
environmental standards, both for the individuals working within the building and the
neighbourhood.

The Green Centre has reduced water consumption by 40 percent of standard usage for a
structure of this size. Besides, water is extensively recycled and used for gardening and filling
toilet cisterns in the building. Large windows have been retained, and the heat is minimized by
the double-glazed windows, one of which is called the e-glass. E-glass is opaque, non-reflecting
glass, which filters and disperses light and heat without reflecting it back outside the building,
besides providing plenty of natural light.
The double-glazing insulates the building as do the fly ash bricks used in its construction,
minimizing use of gen sets and air conditioning. Sensors pick up the presence of additional
numbers of people and fresh cool air is pumped in and out of rooms accordingly. Rooftop solar
panels provide energy for hot water within the building and for all the neon signs and some of
the night lighting. Only T-5 lamps, which are energy efficient, are used.

A stringent standard was set for the elimination of toxic substances and allergens which are
found in adhesives, paints, polishes, ply boards and carpets. Only those products which met
these standards were used at every stage

1.3. Technical Viability

1.3.1. Legal Framework

Table 3 Governing Laws of Green Building Industry in Nepal

S.N. Laws Description

i. The Building Act, 2015& This is the primary legislation that regulates
National Building Code construction of buildings and its design requirements.
This laws further set out general permits and the
regulatory bodies that authorize the permits under
Government of Nepal. As per local self

ii. Local Self Governance This law permits local level governments like
Act, 2017 municipality and metropolitan to regulate matters
that fall in its jurisdiction including, water and waste
management, advertisement, land dispute, among
others.

iii. Environment Protection This legislation primarily regulates issuance of

Act, 2019 environmental clearance related approval and
pollution control measures.
iv. National Shelter Policy, This policy takes into account low carbon generation
2012 in housing and focuses on promoting use of
renewable energy, energy efficiency, waste
management and water management

1.3.2.Registration Process
The current laws do not prescribe the type of business vehicle required for running and
establishing green buildings, however, doing so through a company is suggested. The process of
setting up a company in Nepal is available on the official website of the GON’s Ministry of
Industry Commerce and Supplies- Office of the Company Registrar- www.ocr.gov.np.

The investor wishing to open an industry to run and establish green buildings would be
required to apply to the Department of Industries or Department of Small and Cottage
Industries (depending on the capital size) requesting approval for establishment of the said
industry.

Here, the concerned department would issue approval subsequent to:

 Obtaining recommendations from local level municipality and Department of

Environment.
 Making inspection of the work site.

Fig 1 An Example of a Net Zero Energy Homes- Seisuki House

1.3.3.Market Segmentation
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In Nepal, certain elements tied to green buildings have been implemented on small scale such
as the building of Soaltee Westend Premier, Nepalgunj and Swiss International Hotel Sarowar,
Pokhara. In residential buildings, rain water harvesting and use of energy efficient technologies
are widely used across Nepal.

1.3.4.Availability of Raw Materials and Resources

The primary raw material required for construction of green buildings is alternative bricks or
prefabricated walls which are easily available locally in Nepal. The solar panels and energy
efficient technologies are imported from India or China whereas the pipes and wires are locally
available in Nepal. In terms of human resources, primary consultants or architects are scarcely
available. Since, this is a new concept in Nepal; experienced professional is not easily available
in Nepal. 1

Table 4 Resource Matrix

1
Source: Primary Interview (Key Informant). Pratik Raj Pahari (Swiss International Hotel Sarowar, Pokhara)
 Availability of Raw Material and Resources 
Resources Availability 
Easy  Moderate  Difficult 
Raw Material       
Human Resource       
Financial Resources       
Informational Resources       
Physical and Infrastructural Resources       
Marketing Resources       

1.4. Economic Feasibility

1.4.1. Demand and Supply Analysis

Nepal has a sustainable demand for residential and commercial construction projects. In order
to address Nepal’s demand for living spaces, 1 million homes will be needed to be built in the
next decade according to the ‘Green Buildings Market Intelligence Report’ by the International
Finance Corporation (IFC).

To add to that, a planned reconstruction of 600,000 buildings, repair/retrofitting of 250,000 has

been estimated following the 2015 Nepal earthquake.

Nepal has a shortage in supply of workers particularly skilled workers in the construction
industry. To scale that down in the context of Green Buildings, reasonable demand for workers
especially those familiar with the construction of Green Buildings will be created. Employment
creation is the most sought after qualities of businesses in Nepal.2

Fig 2 Forecasted Market Size for the Construction Sector

2
Source: Green Buildings Market Intelligence Report, IFC
1.4.2. Industry Growth and Trend

The data below shows a steady increase in the demand of buildings in Nepal.

Fig 3 Demand Graph for Construction Sector

Even a partial implementation of the Green Building concept in regards to future construction
demand will catalyse the birth of a new green industry along with industry verticals. The five
crucial constituents of green buildings are:

 Sustainable Construction Materials

 Energy Efficiency Installations
 Water Conservation Installations
 Waste Management
 Passive Solar Design

New supply chains that are necessary in the Green Building process will come into existence. An
economic stimulus along with environmental sustainability will be achieved.

1.4.3. Investment Analysis

A growing population to compliment the expected economic growth of about 7% means an

investment opportunity of $2.7 billion in residential and $650 million in commercial sectors
according to the ‘’Green Buildings Market Intelligence Report’’ by the IFC.
A quick way to assess whether or not the income generated by the property is worth the risk of
investment is to calculate the ratio between gross operating income and the price of the
property. For example a building costing 2 crores with a gross operating income for example
rent of 12 lakhs annually gives a return on investment of 6%. A high ratio is an indicator for
better returns. Similarly green buildings can also be assessed by the difference in cost in
comparison to the difference in rent. Central Park Apartments is one project constructed with
the LEED (Leadership in Energy and Environment Design) initiative. A popular local real estate
website has listed its property at a premium of over 20% compared to similar sized apartments
in the area.

The yield factor varies according to the location and age of the building. In the case of green
office buildings, the yield at the time of sale should be lower because of lower risks. 3 Therefore,
return factors such as market value, rental rate, yield and occupancy rate, for sustainable office
buildings should be clear in determining the value. The availability of green property
transactions will provide positive indicators on value stabilization and at the same time
minimize investment risk. The information is crucial to investors as more evidence of capital
values provide a guide to decision making by investors.

Despite Green Buildings being a nascent industry in Nepal- one of the first movers in
introducing Green Buildings in the country was the FMO, the Netherlands based development
bank, which has invested $6 million in a sustainable, green hotel in Kathmandu. This endeavour
has instilled confidence to those who wish to follow.

1.5. Social Acceptability

The housing sector contributes to approximately 18% of urban employment. By empowering

workers to elevate their skills required in the Green Building process will not only contribute to
reducing unemployment but will also enable workers to earn a better living for themselves.

Training new workers to specifically work on Green Buildings may bring to people’s awareness
that sustainable construction specially green buildings is the next evolutionary step in the
construction industry.

1.6. Bankability of the Industry

1.6.1.Financing Framework

3
Source: World Green Building Council, 2013; Australian Property Institute, 2011
The construction sector does not fall within the priority lending sectors in Nepal for ‘A’ class
commercial banks. However, manufacturers which provide raw materials and goods for the
construction of green buildings fall under priority sector lending such as cement, prefab,
alternative bricks and rooftop solar panels. Companies wishing to install these elements of
green buildings such as rooftop solar panels and rainwater harvesting systems can apply for
financing at certain commercial banks with regards to collateral.

From the existing financing mechanism in the country it is only commercial banks that may
finance the business under their respective commercial and retail lending categories. Please
refer Annex A.

1.6.2. Risk Assessment

Internal and external risk is assessed for Green Buildings. Internal risk consists of market risk,
security risk and financial risk. Similarly, external risk consists of technological risk, economic
risk, political and economic risk. Please refer Annex B for the risk model.

1.6.3.Banking Criteria

When processing the financing from banks, the usual criteria set for successful application
depend on the history and background of the management team, profitability forecast of the
company and sector, capital requirements, building & land permits and revenue models. In
terms of residential use, banks view the asset coverage capacity of the individuals and their
income streams. 4

As a reliable source of financing banks are required to go through the details in Annex C to
provide loan to Green Buildings:

1.7. Policy Gap

1.7.1. Regulatory Framework

Listed below are the regulatory bodies that govern water treatment industry in Nepal:

i. Ministry of Urban Development (MoUD)

This Ministry formulates, implements, monitors, regulates and evaluates policy, plan
and programme related to urban development, urban infrastructure, including physical
planning, coordination, monitoring and evaluation of municipalities. It’s Department of

4
Ibid
 Urban Development and Building Construction is engaged in implementing various
infrastructures.

ii. Department of Environment (DoE)

This Department has been assigned responsibility of improving the environmental
quality; enforce the environment related act, regulation, legislations and standards,
create awareness among people and localize the climate change adaptation and
mitigation practices at local level.

iii. Department of Industries (DOI)

Department of Industry functions under the Ministry of Industry and is responsible for
approving setting up of various kinds of production, refinery and service-oriented
industries.

iv. National Bureau of Standards and Metrology (NBSM)

NBSM undertakes the maintenance and revision of the individual standards contained
in the building code. The Support Unit of the Building Council provides any necessary
expert input required and other relevant support.

v. Local Municipal Government Agencies

Local level governments in various municipalities are responsible for approving building
permits and regulating the infrastructure guidelines for construction of buildings. There
are no separate guidelines for regulating green buildings.

1.7.2. Institutional and Infrastructure Barriers

 Lack of Specific Regulations

The National Adaption Programme of Action co Climate Change (NAPA) 2010, Nepal
Climate Change Policy 2011, and National Shelter Policy 2012 and advocates for
promotion of climate resilient development and establish of climate smart urban
settlements. These are renewable as well as energy-efficient solutions. The Environment
Friendly Local Governance Framework, 2013 also envisages local government and to
approach the renewable energy-efficient solutions.
However, there isn’t a current regulatory framework that guides operation of green
buildings and settlements yet.
 There was a draft Directive on Green Building Technology (2012), which would have
addressed the specifications and standards required for undertaking green buildings in
Nepal. However, it is unclear as of now whether the said Directive is effective.

 National Building Code lacks provision for environment and eco-friendly housing
The National Building Code 2016 envisages types of buildings and specifications required
to be complied for certain types of buildings. This code does not classify eco-friendly
green buildings as of now.
Although it classifies “A Class” building as such building that is constructed by utilizing
advanced technology, it is unclear whether green technologies would be considered
advanced technology

 Local Municipal Government to adapt eco-friendly sustainable housing

The local level governments have been empowered to formulate building bylaws in
addition to the compliance of the National Building Code. Very few local governments of
Dharan, Pokhara and Lalitpur have incorporated green homes components in their own
Building Bylaws and Planning strategies. The same could be followed by other
municipalities of local government.

Fig 4 Business Canvas Model

 Key Partners Key Activities Value Proposition Customers Customers
 Government  Research & Planning  Promotion of Relationship Segments
 Shareholders  Financing Sustainable&  Direct Contact  Commercial
 Employees  Installation Healthy Living with Customers  Household
 Local  Sales & Distribution  Local Employment Customers
Government  Safety & Security Generation
 Local People  After Sales Service  Efficient Use of
 Suppliers  Marketing Water Resource

Key Resources Channels

 Access to Raw  Sales Centres
Materials  Phone
 Financial Resource  Email
 Skilled Manpower
 Technical Knowledge
 Infrastructure
 Office
 Machinery & Tools

Cost Structure Revenue Structure

 Maintenance Cost  Installation Cost
 Purchase of Raw Materials Cost  After Sales Service
 Government Taxes  Sale of Parts
 HR Cost
 Miscellaneous Expenses
 Finance Cost
 Transportation Cost
 After Sales Service Cost

Table 9 Policy Recommendations for

Green Buildings

Barriers to Green Building Example Policy Tools Description of Main Policy Tools
Considerations to Address the Barrier

Building owners do not consider Minimum energy Introduction of legislation, regulations and
lifecycle cost and split incentives performance
requirements for buildings
Limited information suppresses demand Energy Performance
Certification
Up-front cost, constrained budgets Mandatory public
renovation programmes
Lack of technical capacity in the market Public procurement of
high energy efficiency
buildings
Dispersed actors and transaction costs Energy efficiency
obligation (EEO) schemes
modifying building codes to mandate
minimum energy performance requirements
for buildings.
For example information on building
performance – ensuring that it is
communicated in a clear and consistent way
– and associated support for data
management and IT systems.
Mandatory renovation programmes
covering 3% of floor area per year of
sizeable public buildings.
Government acts as a first-mover through
public procurement of high energy efficient
buildings.
Engage energy distributors and/or retail
energy sales companies to help customers
save energy.

Lack of overarching strategic framework
Lack of information
National Energy Efficiency National Energy Efficiency Action Plans
Action Plans (NEEAPs) (NEEAPs) set out estimated energy
consumption and planned energy efficiency
measures, providing a strategic framework
Information and Website development, workshops, targeted
awareness raising information campaigns.

Low government capacity Support for voluntary, LEED certification

industry-led green
building certification

1.7.3. Private Sector Participation, Opportunities and Challenges

Various NGOs and INGOs have been involved in establishing elements of green buildings at
rural areas which include use of energy efficient technologies, rain water harvesting systems,
water management systems, rooftop solar panels and use of alternative bricks in collaboration
with the local level government.

There are private companies which are offering services related to various elements of
constructing green buildings. This is a new and emerging concept in Nepal which has been
recognized by local level governments also and working in PPP models across the country.
Companies such as Soaltee Westend Premier, Nepalgunj and Swiss International Hotel Sarowar,
Pokhara have incorporated green building guidelines in order to construct their buildings.
1.8. Recommendation

Firstly, it is important to communicate to potential markets the relevance of green buildings.

Awareness is key and secondly the business can be approached from 2 angles- creating a green
product, in this case green buildings or supplying products for green business like reflective
paint, solar systems etc- the retail approach.

To conclude the diagram below5 will help articulate the green building landscape in Nepal
followed by a SWOT analysis.

Strength Weakness
In Tune with the ‘’Emergent Age’’Competition with the traditional and
established construction models.
Low Energy Intensity Capital Intensive.
Efficient Use of Resources/ Cost Lack of Expertise
Effective in the Long Run.
Opportunities Threats
Great potential for Growth Unavailability of Professionally
Skilled Workers in Nepal
Good Quality of Workers The Masses Indifference Towards the
Environment
5
Source: Green Buildings Market Intelligence Report, IFC
 Possibility for Government Incentives Regulations
Table 10 SWOT Analysis

2 Waste Water Treatment

2.1. Macro-Economic Outlook and Indicators

2.1.1. Industry Landscape

Wastewater is used water. It includes substances such as human waste, food scraps, oils, soaps
and chemicals. In homes, this includes water from sinks, showers, bathtubs, toilets, washing
machines and dishwashers. Businesses and industries also contribute their share of used water
that must be cleaned.

Wastewater treatment is a procedure used to expel contaminants from wastewater or sewage

and convert it into a profluent that can be reused back to the water cycle with least effect on
the earth, or legitimately reused. water that is no longer needed or is no longer suitable for use
– into bilge water that can be discharged back into the environment. It’s formed by a number of
activities including bathing, washing, using the toilet, and rainwater runoff. Wastewater is full of
contaminants including bacteria, chemicals and other toxins. Its treatment aims at reducing the
contaminants to acceptable levels to make the water safe for discharge back into the
environment.

There are two wastewater treatment plants namely chemical or physical treatment plant, and
biological wastewater treatment plant. Biological waste treatment plants use biological matter
and bacteria to break down waste matter. Physical waste treatment plants use chemical
reactions as well as physical processes to treat wastewater. Biological treatment systems are
ideal for treating wastewater from households and business premises. Physical wastewater
treatment plants are mostly used to treat wastewater from industries, factories and
manufacturing firms. This is because most of the wastewater from these industries contains
chemicals and other toxins that can largely harm the environment.

The size of a DEWATS (Decentralized Waste Water Treatment Systems) can range from
individual onsite systems that serve one household or institution; to shared facilities that serve
up to ten households or public/community facilities serving up to 2000 households. Since the
distance between the point of origin and treatment of wastewater is small, elaborate collection
systems and pumping equipment is avoided thereby reducing costs. This also allows for easier
reuse of treated water which again makes the whole system cost efficient.

Waste Water Treatment process is classified into 4 tiers. They are:

1) Primary Treatment

 The primary treatment phase retains all settable solids and allow only dissolved solids to
discharge.
 In settler, sedimentation tank, septic tank or biogas settler.
 Another type of primary treatment is sedimentation tank for collection and use of
biogas generated from decomposition of settled organic particles.

2) Secondary Treatment

 Suspended and dissolved solids in the wastewater undergo anaerobic degradation due
to contact with an active sludge blanket on the bottom of each chamber.

3) Tertiary Treatment

 It is the secondary and/or tertiary treatment phase and cleans the wastewater by
biological conversion, physical filtration and chemical adsorption.

4) Sludge Treatment
  Sludge generated from primary and secondary treatment units can be dried applying on
sand beds, which is also called sludge drying beds. De-sludging intervals can be set to
coincide with the dry season in order speed up the drying process.

2.1.2.Industry Contribution to GDP

Electricity, gas and water sector contribute ~2% of the total country’s GDP. The sector has
grown at a CAGR rate of ~5.4% from the period of FY 2008/09 to 2017/18. At the same time,
the country’s CAGR GDP rate stands at ~3.4% during the same review period6.

2.1.3.Geographic Concentration

Ever since its inception, the Smart Paani’s team of technicians have already managed to install
over 500 rainwater harvest systems in Kathmandu valley. Currently, with an aim to extend its
solution to people outside the valley, Smart Paani has closely worked with Dharan Municipality
who have made it mandatory for every new building to have rainwater harvesting system. It is
one of the key prominent market players in the rainwater harvesting market and it aims to
extend its reach already identified 11 parts of the country to expand within the next year.

The small-scale water treatment plants are mainly installed in Kathmandu valley. Apart from
that, there are larger scale water treatment plants in Nepal as listed below:
6
Nepal Rastra Bank (2018). Current Macroeconomic Data
Table 2 Water Treatment Plants in Nepal

Plant Location Capacity (m3/day) Treating

Dhulikhel Hospital Dhulikhel 40 Hospital

wastewater
Private House at Dallu Kathmandu 0.5 Grey Water
Kathmandu Metropolitian City Kathmandu 40 Septage
Sushma Koirala Memorial Hospital Kathmandu 25 Wastewater
Kathmandu University Dhulikhel 40 Wastewater
Staff Quarter if Middle Marshyangdi   26 Wastewater
Hydro Electric Power Station
ENPHO Laboratory Kathmandu 1 Wastewater
KMC Septage and Leachate Kathmandu Septage: 75 Septage and
Treatment Plan Leachate: 40 Leachate
Sunga Municipal Lalitpur 25 Wastewater
Tansen Municipality Sewerage Tansen   Sewerage
Treatment Plant

Competitive Analysis for Waste Water Treatment Plant:

Competitive Forces High Medium Low

Barriers to Entry
Threats of Substitute
Bargaining Power of
Supplier
Bargaining Power of
Customer
Competitive Rivalry
Industry Attractiveness
Table 2 Competitive Analysis Consisting of Porter’s 5 Forces Model

2.2. Environmental Suitability

Recycling can immensely reduce GHG emissions. Recycling materials saves energy for creating
new products of same nature. This further reduces air and water pollution and at the same
time, preserves the natural resources. Mainly, recycling reduces the need for landfill sites which
greatly contribute to GHG emissions. Methane gas is produced by landfill sites which are 21
times more potent at trapping heat in the earth’s atmosphere than CO 2.
2.2.1. Obtaining Environmental Clearance

The new Environment Protection Act, 2019 primarily regulates issuance of environmental
clearance related approvals including approval of environmental clearance study i.e. either
environmental impact assessment (EIA) or initial environment examination (IEE). Service
oriented activities as well as assembling activities that emit some level of pollution or that
which affects the environment requires environment clearance in order to operate industrial
plants.

However, it is uncertain whether small scale industry running waste water treatment plant
would be required to undertake IEE or EIA.

The procedure and requirement to obtain environmental clearance will be clarified more in the
soon to be published rules set under Environment Protection Act, until then there is still
regulatory uncertainty for obtaining environmental clearance.

2.3. Technical Viability

2.3.1.Legal Framework

These are the laws that govern water treatment plants industry in Nepal:

Table 3 Governing Laws for Water Treatment Plants

S.N. Laws Description

i. Industrial Enterprises Act, This new law classifies types of service, manufacturing
2020 and refinery industries among others, and further
regulates the operation of industries in Nepal. Approval
to establish industry will have to be taken on the basis of
this legislation.
ii. Local Self Governance Act, This law permits local level governments like municipality
2017 and metropolitan to regulate matters that fall in its
jurisdiction including, water and waste management,
advertisement, land dispute, among others.
iii. Environment Protection This legislation primarily regulates issuance of
Act, 2019 environmental clearance related approval and pollution
control measures.
iv. Total Sanitation This guideline aimed to bring about awareness in
Guidelines, 2017 domestic and institutional water sanitation, and further
aimed to prepare provisions to uplift sanitation works.
2.3.2.Registration Process

The current laws do not prescribe the type of business vehicle required for running and
establishing waste water treatment plants, however, doing so through a company is suggested.

Brief Process to run and establish waste water treatment plants:

The investor wishing to open an industry to run and establish water treatment plants would be
required to apply to the Department of Industries or Department of Small and Cottage
Industries (depending on the capital size) requesting approval for establishment of the said
industry.

Here, the concerned department would issue approval subsequent to:

 Obtaining recommendations from local level municipality, Department of

Environment, and possibly Department of Water Supply and Sewerage as well.
 Inspection of the work site.

2.3.3.Market Segmentation

Water is the most basic need for any life. But with the increasing pollution, the sources of water
are getting polluted and infected. Virtually no source of water is clean enough to not need
filtration. Groundwater requires removal of chemicals, nuisance/harmful minerals, and
bacteria. Tanker water is not drinkable without filtration and this is similar to the municipal
water supply. Self-sufficiency is sought by households digging borewells (and businesses,
schools and hotels) so they all need filtration systems to avoid broken pipes, stains and to make
the water drinkable. Even water sold in jars is not trusted by many consumers.

2.3.4.Availability of Raw Materials and Resources

Depending on the quantity of water sources, various infrastructures are needed in order to
process and filter the water sources. One of the major challenges is availability of land. With the
growing urbanization, the value of land is inflating at a geometric rate. Also, the access to road
transportation outside the valley seems to be a problem.7

2.4. Economic Feasibility

2.4.1.Demand and Supply Analysis

The demand on this sector is quite high and increasing on all scales as clean and everyone
wants hygienic water in their homes. Taking the scenario of Kathmandu Valley, its population is
growing at an alarming rate of 4.7% which is more than double the population growth rate of
Nepal. The daily water demand for Kathmandu Valley is more than 360 million liters per day,
whereas the supply is around 90 million liters per day in dry season, and 140 million liters per
day in wet season.

The primary source of water in most of the households of Kathmandu valley is tap-water (for
more than 70% of households). As per recent data, tanker-water has stepped up to second
spot, proving out to be primary water source in more than 14% of households in the valley. 8

talking about groundwater, its extraction started since 1970s in Kathmandu valley, and since
then the rate of extraction has been increasing at an alarming rate.

High nutrient content in wastewater was also considered by the farmers to contribute
positively in crop production. The nutrients present in wastewater are needed by the crops in
large quantities for their growth and development and production.

Figure 1 Estimated Supply Deficit of Water in Kathmandu Valley

7
Source: Primary Interview (Key Informant). Tyler McMahon
8
 Estimated Supply Deficit in Kathmandu Valley
600
500 481.5

400
300
200 151.9
MLD

100
0
2021
-100
-200 -159.6
-300
-400 -329.6

Existing Supply Capacity Estimated Demand

Estimated Deficit without MWSP Estimated Deficit if MWSP is completed

2.4.2.Industry Trend

In Nepal, the practice of wastewater uses in agriculture and in other uses and the emerging
environmental and health consequences are not well documented despite the fact that the
practice of wastewater irrigation has been age old tradition and intricately linked to culture and
livelihood system of the people in Kathmandu valley. In Kathmandu valley, in the agricultural
land located within the city centres and in the urban fringes, the farmers are known to
practicing wastewater irrigation in significantly larger areas. The practice of wastewater use in
Kathmandu valley is largely informal and there is no institutional regulation for wastewater use,
at least for now. The farmers practicing wastewater irrigation use wastewater from different
sources which include municipal sewage, rivers carrying wastewater and water stored in the
ponds and pools developed in the urban, peri-urban and rural areas. Almost no documented
information is available on the practice of wastewater use outside Kathmandu valley though
farmers in other parts of the country are also known to using wastewater in crop production.

2.4.3.Investment and Financial Analysis

Water treatment plants do require a reasonable capital among which around 60% is mainly
required for purchase of raw materials and long-term operational expenses combined.
However, in order to create a water treatment plant for bigger population, a higher investment
is required.
A Sewerage Master Plan for Kathmandu projected to the year 2030 — Kathmandu Valley
Wastewater Management Project — has been prepared under an ADB Loan. The scope of this
project includes rehabilitating existing network, laying new interceptors along the major rivers,
expansion of networks, refurbishment of existing treatment plants, and construction of new
treatment plants. The cost of the project is approximately USD 817 million. The plan projects a
population of 4.5 million by 2025 and assumes that 70% of it will be covered through a
sewerage network, with 30% relying on onsite sanitation systems.

2.5. Social Acceptability

Employment Generation

Both skilled and semi-skilled jobs are generated. However, the problem lies in employee
turnover due to out-migration of skilled employees. As of FY 2017/18, a total of 42,000
employees were engaged in the sector water supply in Nepal. This is ~0.6% of the total
employed population in Nepal.9

2.6. Bankability of the Industry

2.6.1.Financing Framework

The water supply sector is within the priority lending sectors in Nepal for ‘A’ class commercial
banks. In 2017, NRB declared the lending requirements for commercial banks toward
productive sectors as 25% of their total loan portfolio. Within the denoted 25%, 10% is to be
contributed from agriculture sector while 5% from other productive sectors.

Since, the investment required for starting such company is low and the operational costs are
minimum, financing for such companies are provided through banks. The financial feasibility
table can be found Annex D.

2.6.2.Risk Assessment

Banks financing water treatment plants see low risk in the sector as they are mostly based on
project basis and there is high demand for the sector. 10

Internal and external risk is assessed for Waste Water Treatment Plant. Internal risk consists of
market risk, security risk and financial risk. Similarly, external risk consists of technological risk,
economic risk, political and economic risk. The complete risk model can be found in Annex E.

9
CBS (2019). Report on the Nepal Labour Force Survey 2017/18.
10
Source: Primary Interview (Key Informant). Dinesh Dulal
2.6.3.Banking Criteria

When processing the financing from banks, the usual criteria set for successful application
depending on the history and background of the company, management team, profitability
forecast of the company & sector and capital requirements.

As a reliable source of financing banks are required to go through the details provided in Annex
F to provide loans to Waste Water Treatment Plants:

2.7. Policy Gap

2.7.1.Regulatory Framework

Listed below are the regulatory bodies that govern water treatment industry in Nepal:

vi. Ministry of Water Supply and Sanitation (MoWSS)

This Ministry is responsible for formulating, implementing, monitoring, regulating and
evaluating policy, plan and programme related to drinking water, sanitation and
sewerage. Its Department of Water Supply and Sewerage further is tasked with
regulating drinking water supply and sanitation facilities.

vii. Ministry of Urban Development (MoUD)

This Ministry formulates, implements, monitors, regulates and evaluates policy, plan
and programme related to urban development, urban infrastructure, including physical
planning, coordination, monitoring and evaluation of municipalities. It’s Department of
Urban Development and Building Construction is engaged in implementing water
supply, sewerage and drainage infrastructures.

viii. Department of Environment (DoE)

This Department has been assigned responsibility of improving the environmental
quality; enforce the environment related act, regulation, legislations and standards,
create awareness among people and localize the climate change adaptation and
mitigation practices at local level.

ix. Department of Industries (DOI)

 Department of Industry functions under the Ministry of Industry and is responsible for
approving setting up of various kinds of production, refinery and service-oriented
industries including water treatment related industries.

2.7.2.Institutional and Infrastructure Barriers

 There are numerous policies addressing water sanitation and water management,
however, the policies do not seem to have been turned into actual Acts and Rules.
 The existing waste management law mainly recognizes solid waste management in a
particular area; however, waste and water treatment management inn household basis
has not been addressed yet.
 The adoption of new environmentally-friendly technologies is becoming a key issue in
both public debate and policy arenas. Adoption by wastewater utilities (rainwater) and
investigation on why stringent environmental regulations are not sufficient to foster it.
 The adoption of advanced wastewater treatment technologies is made complex by the
sunk nature of highly specific infrastructures and the consequent exposure of utilities to
political and institutional influences. In addition, it requires the involvement of various
actors (utilities, suppliers, contractors), and is influenced by various stakeholders
(communities, business users, citizens’ associations) that generally have no aligned
objectives.
 On the other hand, community-level side, the analysis shows that residents and local
businesses are able to mobilize resources via more ‘convenient’ and ‘more portable’
methods.

2.7.3. Private Sector Participation, Opportunities and Challenges

Private sector investment and/or PPPs in high population density areas look promising.
However, investment must be backed by sound analysis of risks and returns. Investment
requirements are contingent upon the size, population density of towns, economy, and choice
of collection and treatment methodologies.

The private sector can also enter into BOOT contract or PPP agreements with the government
for investment in water and sanitation sector. It can also sub-contract water and sanitation
services to improve operation and performance and reduce the costs of the existing systems.
Since the municipalities are facing shortage of human and capital resources, it is highly likely
that they will try to attract and entrust the private sector with building, operating, and
maintaining water and wastewater operations. Such partnerships with the private sector seem
easier to implement in the new federal structure with a much smaller size of local
administration.
2.8. Recommendations

Despite being one of the water-rich countries of the world, Nepal has been suffering from
water scarcity and a lack of sanitation for many years. In particular, remote and rural areas of
the mid-hills do not have access to safe and sustainable drinking water and adequate sanitation
and hygiene facilities. The majority of the villages do not have access to pipe water and have to
rely on polluted ponds and rivers for cleaning, bathing, and drinking.

Therefore, alternative mitigation options, such as planning land use for potential recharge,
introducing micro-to-macro level rainwater harvesting structures, conjunctive use of surface
and groundwater resources, and water demand-side management, would be helpful in enabling
livelihoods in Nepal’s mid-hills.

Table 8 SWOT Analysis

Strength Weakness
Highly Scalable Service Centric
Increasing Demand Need to Create Suitable
Infrastructures which can Prove
Costly to End Customers
Higher Value for Money for Dependency on Rain Water
Consumers
Lower Cost of Repair & Maintenance
Opportunities Threats
Government Prioritized Sector Unavailability of Professionally
Skilled Workers in Nepal
Technological Advancement High Cost of Compliance and Safety
Increasing Awareness Levels of Increased Supply of Clean Water
Consumers through Public Pipes
 Fig 2 Business Canvas Model

Key Partners Key Activities Value Proposition Customers Customers

 Government  Research & Planning  Promotion of Relationship Segments
 Shareholders  Financing Sustainable&  Direct Contact  Commercial
 Employees  Installation Healthy Living with Customers  Household
 Local  Sales & Distribution  Local Employment Customers
Government  Safety & Security Generation
 Local People  After Sales Service  Efficient Use of
 Suppliers  Marketing Water Resource

Key Resources Channels

 Access to Raw  Sales Centres
Materials  Phone
 Financial Resource  Email
 Skilled Manpower
 Technical Knowledge
 Infrastructure
 Office
 Machinery & Tools

Cost Structure Revenue Structure

 Maintenance Cost  Installation Cost
 Purchase of Raw Materials Cost  After Sales Service
 Government Taxes  Sale of Parts
 HR Cost
 Miscellaneous Expenses
 Finance Cost
 Transportation Cost
 After Sales Service Cost
 Annexure
Annex A

Table a. Financing Feasibility for Green Buildings

Sector/Subsector Source of Financing Availability

Financing Framework
Easy Modera Difficult Not
te Applicable

Waste Debt Productive sector

Management – lending
Waste to energy
Priority sector
disbursement

Deprived sector
lending

Subsidized lending

Commercial lending

Retail lending

Provision based
lending

Non-collateral
lending

Micro Credit

Bond/Debenture

Personal lending

Equity Personal Investment

Private Placement

Public Issue

PE/VC Private Equity

Venture Capital
 Government Seed Investment
Financing
Subsidy from
Government

Alternative Specialized
Investment Investment Fund

Green Fund

Annex B

Table b. Risk Model

Risk Categories Risk Factors Analysis Degree of Risk

Low Medium High

Internal Risk: Analysis is conducted in terms of competition, demand risk,

business and management risk and security risk.

Industry/Market Risk Growing Competition -Increasing market

segment and market
size for Green
Buildings

Demand Risk -Increasing climate

concern

-Organizational
internal policy

Business And Conflict in - Most of the

Management Risk Management companies and firm
running on
partnership and
private company
model increasing the
conflicting situation
 and exposure.

Business and - Low experience of

Management Risk most of the firm in
the industry of below
5 years.

Financial And Cash Sales growth - Increasing demand

Flow Risk is expected to
increase the sales
projection in future.

Debt Service Coverage - Comfortable for

Ratio company and
industry as whole.

Others ratio - Comfortable

current ratio and
quick ratio for EV
firms.

Security Risk Security Coverage - Covered with the

insurance

- A portion of margin
is managed from the
buyer’s equity.

2. External Risk It consists of political, legal, economical, technological, social and global risk.

Political Risk - Positive political

commitment in
National and
International arena.

Legal Risk - Legal provision are

under the draft

- Favorable laws are

 expected

Economical Risk - Higher investment

for the company

- Favorable interest
rate

- Higher ratio
loanable funds

- Under priority
sector lending

Technological Risk -Upgrading

technology

- Certification

-Technology
adaptation

Socio-cultural Risk -Social acceptability

within the dumping
sites

-Environmental
Protection

Overall Risk

Annex C

Table c. Banking Requirements

Banking Covenants Standard

Requirement
Control Period Inventory Report Monthly/Quarterly
Account Turnover 1.5 time of the proposed
 Requirement working capital limit
Risk Indicators Industry average
Repayment Ability (DSCR) Above 1
Experience and Technical Knowledge of the promoter Industry average
Review Fresh CIB report prior limit implementation
Requirement MOA and AOA
complete Security documents
Value as per available valuation report of mortgaged property
verified through site inspection
adequate Insurance Coverage
Last inspection of stocks not over 6 months
Status of the applicant and personal guarantor not appear in the list
of defaulters published by Banks
Consent from all the legal heirs of the mortgage property owner
Documents Customer's Request
Requirement
Valid Registration renewal of the firm
Updated Business tax clearance of the firm/company
Borrower/PG's duly filled self-declaration of multiple banking
Construction completion certificate/approval to construct building
along with other necessary documentary evidences (blue print,
trace map/naksa-pass) of the mortgage security (land & building)
Borrower/PG's duly filled self declaration of net-worth have been
obtained/updated
Copy of Citizenship certificate/Passport of the borrower/PGs
Copy of the legal documents duly marked with original seen and
verified
Company/firm's all the financials documents including stock &
receivable statements duly signed and stamped

(Source: KII, Primary Source, 2020)

The banking and financial institutions takes the following factors into consideration to finance
Green Buildings:

Table c1. Banking Requirements

Sector/Subsector Criteria Covenant Standard Bankability

(Low/Medium/High)

Green Buildings Non-financial Experience of Industry High

the promoters Average

Business Industry
growth Average
 Satisfactory 1.5 times
security lending
coverage

Business Risk Low

Concern

Financial Repayment Cash flow to

and cash flow EMI
concern

Internal Rate Industry

of Return average
(IRR)

Pay Back Industry

Period (PBP) average

Profitability Industry
(Net Margin) average

DSCR <1

Return on Industry
Equity (ROE) Average

(Source: KII, Primary Source, 2020)

Internal Rate of Return (IRR): Internal Rate of return (IRR) is the expected compounded
annual rate of return that will be earned on a project or investment over the period of
time.
Pay Back Period (PBP): The payback period is the number of years the project requires to
recover the investment.
Net Margin: Net margin the profit margin after adjusting the all the direct and indirect cost
the project.
Debt Services Coverage Ratio (DSCR): Debt Service Coverage Ratio is ratio of operating
income available to debt servicing for interest, principal and lease payments. It is a popular
benchmark used in the measurement of an entity's ability to produce enough cash to cover
its debt payments.
Interest Coverage Ratio: Interest coverage ratio is a measure of a company's ability to
honour its debt payments.

Return on Equity (ROE): The return on equity is a measure of the profitability of a

business in relation to the equity. ROE measures how well a company uses investments to
generate earnings growth.
Annex D

Table d. Financing Feasibility for Waste Water Treatment Plant

Sector/Subsector Source of Financing Availability

Financing Framework
Easy Modera Difficult Not
te Applicable

Waste Water Debt Productive sector

Treatment Plant lending

Priority sector
disbursement

Deprived sector
lending

Subsidized lending

Commercial lending

Retail lending

Provision based
lending

Non-collateral
lending

Micro Credit

Bond/Debenture

Personal lending

Equity Personal Investment

Private Placement

Public Issue

PE/VC Private Equity

Venture Capital

Government Seed Investment

Financing
Subsidy from
Government
 Alternative Specialized
Investment Investment Fund

Green Fund

Annex E

Table e. Risk Model

Risk Categories Risk Factors Analysis Degree of Risk

Low Medium High

Internal Risk: Analysis is conducted in terms of competition, demand risk,

business and management risk and security risk.

Industry/Market Risk Growing Competition -Increasing market

segment and market
size for HWTP

Demand Risk -Increasing climate

concern

-Organizational
internal policy

Business And Conflict in - Most of the

Management Risk Management companies and firm
running on
partnership and
private company
model increasing the
conflicting situation
and exposure.

Business and - Low experience of

Management Risk most of the firm in
the industry of below
5 years.
Financial And Cash Sales growth - Increasing demand
Flow Risk is expected to
increase the sales
projection in future.

Debt Service Coverage - Comfortable for

Ratio company and
industry as whole.

Others ratio - Comfortable

current ratio and
quick ratio for EV
firms.

Security Risk Security Coverage - Covered with the

insurance

- A portion of margin
is managed from the
buyer’s equity.

2. External Risk It consists of political, legal, economical, technological, social and global risk.

Political Risk - Positive political

commitment in
National and
International arena.

Legal Risk - Legal provision are

under the draft

- Favorable laws are

expected

Economical Risk - Higher investment

for the company

- Favorable interest
rate
 - Higher ratio
loanable funds

- Under priority
sector lending

Technological Risk -Upgrading

technology

- Certification

-Technology
adaptation

Socio-cultural Risk -Social acceptability

within the dumping
sites

-Environmental
Protection

Overall Risk

Annex F
Table f. Banking Requirements

Banking Covenants Standard

Requirement
Control Period Inventory Report Monthly/Quarterly
Requirement Account Turnover 1.5 time of the proposed
working capital limit
Risk Indicators Industry average
Repayment Ability (DSCR) Above 1
Experience and Technical Knowledge of the promoter Industry average
Review Fresh CIB report prior limit implementation
Requirement MOA and AOA
complete Security documents
Value as per available valuation report of mortgaged property
verified through site inspection
adequate Insurance Coverage
Last inspection of stocks not over 6 months
Status of the applicant and personal guarantor not appear in the list
of defaulters published by Banks
 Consent from all the legal heirs of the mortgage property owner
Documents Customer's Request
Requirement
Valid Registration renewal of the firm
Updated Business tax clearance of the firm/company
Borrower/PG's duly filled self-declaration of multiple banking
Construction completion certificate/approval to construct building
along with other necessary documentary evidences (blue print,
trace map/naksa-pass) of the mortgage security (land & building)
Borrower/PG's duly filled self declaration of net-worth have been
obtained/updated
Copy of Citizenship certificate/Passport of the borrower/PGs
Copy of the legal documents duly marked with original seen and
verified
Company/firm's all the financials documents including stock &
receivable statements duly signed and stamped
(Source: KII, Primary Source, 2020)

The banking and financial institutions takes the following factors into consideration to finance
the Waste Water Treatment business:

Table f1. Banking Requirements

Sector/Subsector Criteria Covenant Standard Bankability

(Low/Medium/High)

Transportation- Non-financial Experience of Industry High

Electric Vehicle the promoters Average

Business Industry
growth Average

Satisfactory 1.5 times

security lending
coverage

Business Risk Low

Concern

Financial Repayment Cash flow to

and cash flow EMI
concern

Internal Rate Industry

of Return average
(IRR)

Pay Back Industry

Period (PBP) average

Profitability Industry
 (Net Margin) average

DSCR <1

Return on Industry
Equity (ROE) Average

(Source: KII, Primary Source, 2020)

Internal Rate of Return (IRR): Internal Rate of return (IRR) is the expected compounded
annual rate of return that will be earned on a project or investment over the period of
time.
Pay Back Period (PBP): The payback period is the number of years the project requires to
recover the investment.
Net Margin: Net margin the profit margin after adjusting the all the direct and indirect cost
the project.
Debt Services Coverage Ratio (DSCR): Debt Service Coverage Ratio is ratio of operating
income available to debt servicing for interest, principal and lease payments. It is a popular
benchmark used in the measurement of an entity's ability to produce enough cash to cover
its debt payments.
Interest Coverage Ratio: Interest coverage ratio is a measure of a company's ability to
honour its debt payments.
Return on Equity (ROE): The return on equity is a measure of the profitability of a business
in relation to the equity. ROE measures how well a company uses investments to generate
earnings growth.