Concerned about the dramatic drop in revenue collection, the government has decided to lift restrictions on land plotting after 10 months in an effort to improve the real estate market, which has slumped dramatically in the last year.

The Ministry of Land Management, Cooperatives, and Poverty Alleviation (MoLMCPA) halted land plotting by introducing the Land Use Regulations 2022.

Local governments across the country were required by the regulations to classify lands for residential, commercial, agricultural, and other purposes. However, only a few of the 753 local governments were able to complete the classification of lands under their jurisdiction. According to businesspeople, this delay, along with other factors, has had a significant impact on the real estate sector.

Prior to the intrduction of the Land Use Regulations, plotting of land up to 855 square feet, or 2.5 aanas, was permitted in the Kathmandu Valley. It was increased to 1,403 square feet, which is equivalent to 4.1 aanas, with the new arrangement in place.

With the government's decision to reverse its previous decision, lands in the capital valley can now be partioned up to 2.5 aanas. The new provision is expected to make real estate transactions and property division easier.

Previously, land was classified into ten zones: agricultural, residential, commercial, industrial, mines and mineral zone, forest zone, public use and open space zone, cultural and archaeological zone, importance, and others. According to the decision, the MoLMCPA wrote to local governments requesting that agricultural and non-agricultural lands be classified. Local governments, however, failed to classify lands as directed by the federal government after residents in many areas across the country demanded that their lands be classified as non-agricultural.

Only 160 of the 753 local units were able to classify lands.

Similarly, the government has decided to extend the time for local governments to classify land. According to real estate and housing industry insiders, lifting land classification restrictions alone will not bring the real estate industry back to normalcy.