CARE Ratings Nepal Limited has reaffirmed the long-term credit rating of CARE-NP B+ (Single B Plus) assigned to the banking facilities of Hotel Shahanshah International Private Limited, maintaining the rating on the company’s total long-term bank facilities amounting to Rs 2.269 billion.
According to the latest rating review released in June 2026, the reaffirmation reflects a combination of project-related implementation risks, ongoing delays in construction progress, and recent strategic changes undertaken by the company regarding its large-scale mixed-use real estate development project in Kathmandu.
While the rating agency acknowledged certain operational risks, it also highlighted the company’s experienced promoter group, favorable project location, and the stable long-term demand outlook in Nepal’s real estate sector as positive supporting factors behind the reaffirmation.
Hotel Shahanshah International Revises Business Strategy, Moves Away from Hotel Operations
One of the major developments influencing the latest rating decision has been the company’s strategic decision to discontinue its previously planned hotel operation and instead lease out its completed commercial building to a third party for rental income generation.
Hotel Shahanshah International is currently developing a mixed-use real estate project located in Tokha Municipality, consisting of a commercial complex and a large residential apartment development. Initially, part of the completed commercial infrastructure had been planned for hotel operations under the company’s original hospitality business model.
However, the Hotel Shahanshah International has now shifted its strategy and decided to lease the completed commercial property rather than directly operate it as a hotel business. Rating analysts noted that this shift has created uncertainty around future revenue visibility while also increasing overall project implementation risk.
Apartment Construction Faces Delays Despite Debt Financing Already Secured
According to the report, the Hotel Shahanshah International’s residential apartment segment remains the biggest area of concern. The apartment project carries an estimated development cost of approximately Rs 2.026 billion, planned to be financed through a 60:40 debt-equity structure, including Rs 1.216 billion in term loans and Rs 811 million in promoter equity investment.
Although total debt financing for the project has already been secured, construction progress of Hotel Shahanshah International has remained stalled since the last review period. The apartment construction had not commenced during the previous review, and despite completion of the design phase, progress has been delayed due to pending regulatory approvals.
Construction is now expected to begin by mid-July 2026, while project completion is projected within the next three years. Regulatory approvals required for project commencement are still pending, adding further uncertainty to the implementation timeline. CARE Ratings Nepal stated that these delays significantly increase project execution risk, particularly as the company adjusts its overall business model.
Real Estate Market Competition and Sales Risk Remain Major Concerns
The rating report also identified multiple external market risks affecting the company’s outlook. Nepal’s residential apartment and real estate sector remains highly competitive, with both organized developers and individual property sellers actively competing for buyers, particularly within the Kathmandu Valley market. As Hotel Shahanshah International’s project remains concentrated entirely within Kathmandu, the company faces geographic concentration risk, meaning future revenues are heavily dependent on demand conditions within a single market.
Additionally, analysts highlighted concerns over the project’s future saleability. The apartment market in Nepal remains highly fragmented, with several established developers already offering competitive housing projects at relatively affordable price points, increasing competition for potential buyers. Any slowdown in demand, unfavorable economic conditions, or shifts in consumer purchasing behavior could directly affect the company’s cash flow and repayment capacity.
Exposure to Volatile Interest Rates Adds Financial Pressure
CARE Ratings Nepal further noted that the company remains exposed to interest rate fluctuations because its borrowings operate under a floating interest rate structure. Under Nepal’s banking system, lending rates are directly influenced by quarterly changes in base rates set by banks and financial institutions.
Since Nepal’s financial sector frequently experiences liquidity fluctuations, sudden increases in borrowing costs could negatively affect the company’s future profit margins and increase debt servicing pressure. The report emphasized that higher-than-expected interest rates remain one of the important financial risks facing the project moving forward.
IMS Group Promoters Provide Strong Management Support in Hotel Shahanshah International
Despite operational concerns, CARE Ratings Nepal highlighted the company’s strong promoter background as one of its key strengths. Hotel Shahanshah International operates under the larger umbrella of IMS Group, one of Nepal’s established private business groups. The company is chaired by prominent businessman Deepak Kumar Malhotra, who has built a diversified business portfolio spanning mobile distribution, international brand partnerships, and multiple commercial ventures.
Managing Director Manish Prasad Rajbhandari also brings significant leadership experience through involvement in various chambers of commerce and multiple corporate roles. Meanwhile, shareholder Dikesh Malhotra continues to oversee strategic operations while also leading philanthropic initiatives through the DM Foundation. The rating agency stated that the promoters’ extensive business experience provides operational credibility and improves confidence regarding long-term project management.
Tokha Project Benefits from Strategic Residential Location
Another important positive factor highlighted in the report is the favorable location of the development project. Situated in Tokha Municipality, roughly two kilometers from the highway and within proximity to Kathmandu city, the location is considered attractive for residential development.
The surrounding area provides access to major educational institutions, hospitals, shopping centers, banking services, employment opportunities, and growing urban infrastructure. With increasing demand among homebuyers seeking quieter residential environments outside Kathmandu’s congested urban center while maintaining easy city access, analysts believe the location remains favorable for long-term demand.
Stable Long-Term Outlook for Nepal’s Real Estate Sector
Despite short-term market challenges, CARE Ratings Nepal remains optimistic about medium-term demand growth within Nepal’s real estate sector. The agency noted that increasing preference among buyers for ready-to-move residential apartments over individually constructed homes is gradually supporting demand growth.
Real estate continues to remain one of the major sectors for bank lending in Nepal, particularly within rapidly urbanizing areas where land supply remains limited, and investment alternatives are comparatively fewer. Industry observers believe companies such as Hotel Shahanshah International could benefit from future demand recovery, provided project execution remains on schedule and customer sales targets are achieved successfully.
Future Project Completion Will Determine Rating Outlook
Looking ahead, CARE Ratings Nepal stated that the company’s ability to successfully begin construction on time, complete the apartment project within estimated cost, achieve targeted sales volumes, and maintain steady customer payment collection will remain the key factors influencing future rating movements.
Incorporated in January 1996, Hotel Shahanshah International Private Limited remains one of the notable real estate development companies operating under IMS Group, and its ongoing Tokha mixed-use development project continues to be closely watched by investors, lenders, and Nepal’s broader real estate market.
