Land transactions have contracted significantly in the last two years following the Nepal Rastra Bank (NRB) and government express ing serious concern about the high investment in realty sector in 2010-11. The directives of NRB to limit the banks and financial institutions (BFIs) investment in real estate to 25 per cent is the main reason cited for the sluggishness, according to realty experts.

“The revenue collections in the fiscal year 2009-10 and 2010-11 were Rs six billion, which were unexpectedly higher than our target. However, after NRB's policy to cap the ceiling of real estate exposure of BFIs, the revenue collection gradually showed a southward trend year on year,“ says Kamal Timalsina, undersecretary at the Department of Land Reform and Management (DoLRM), Babar Mahal. Stating that the transaction of land is normal these days, Timalsina says, “Though land transaction on need basis has not been affecte much, plotting, h o u s i n g projects and apartments are significantly slow-paced.“

Land transactions in sub-urban areas and village development committees (VDCs) are higher than in core urban areas. “The reason for the increased transaction in sub-urban areas is that the land is comparatively more affordable there,“ says Dinesh Prasad Sharma, chief of Land Revenue Office (LRO) at Dillibazaar.

According to DoLRM, the total land transaction units of VDCs till January in the country for this fiscal year were 96,788, while urban areas recorded 44,783 units. In the fiscal year 201112, DoLRM witnessed total transaction of 761,070 plots, in which VDCs scored 536,740 units and urban areas recorded 224,330 units. Reportedly, the dealings of land are comparatively high in Kathmandu valley, Pokhara, Bhairahawa, Jhapa, Chitwan, Biratnagar, and Birgunj areas. Timalsina informs, “The property transfer to women is increasing in urban areas privilege provided for women while less women have property in their names in the VDCs.“

Stating that land transaction is decreasing, Sharma says, “Registration revenue, however, has soared due to active enforcement of the Money Laundering Act and stringent activities of the Commission for the Investigation of Abuse of Authority.“

Sharma further informs that opposed to the past, landowners these days do not conduct as many fake transactions, where the amount was reduced in the paper to evade the tax.

Timalsina says that the registration revenue target set for fiscal year 201213 is Rs 4.20 billion and DoLRM is confident about reaching it. According to Timalsina, they have already collected Rs 2.890 billion till February.
The increasing number of collateral land in BFIs, monitory policy of NRB, taxation and income source disclosure provision for more than Rs 10 million are the reasons that have impacted the realty. Unlike 2010-11, investment in land transaction is not bearing much fruit, Timalsina says, “Witnessing stagnancy in realty, we presume people have shifted focus and are investing in gold and silver, share markets, industrial and agricultural sector, among others. That is positive sign for the economy.“

Baburam Khanal, vice secretary at LRO, Lalitpur, says, the land price is comparatively lower, as there are more sellers than buyers in the market. Stating that land prices have depreciated by up to 25 per cent, he claims only those who are in direct need of funds to clear their loans are selling their property at lower rates.
He says, “Land owners are holding on to their property expecting a rise.“

Khanal presumes that the situation will get better after six months. The IRO at Lalitpur witnesses numerous land transactions from sub-urban areas like Imadol, Lamatar, Saibu, Bungamati, Sanogaun as per individual need basis.

source: The Himalayan Times,9 March 2013