The government’s collection of land registration fees jumped 21.16 percent during the first quarter in an indication of growing property transfers in the country.

According to the Department of Land Reforms and Management, the government earned Rs 144.69 billion during the period compared to Rs 119.42 billion during the same period in the last fiscal year.

Monthly revenue collection was higher during each of the three months compared to the previous fiscal. Realty traders and bankers said that transfers of small realty projects had surged in recent months. Bankers added that demand for small houses and plots had risen. Upendra Poudel, chief executive officer of NMB Bank, said although realty traders have started repaying loans, the biggest problem is the non sales of apartment projects. “There is demand for loans to complete projects that have been started, but we are cautious to lend,” he said.

Meanwhile, the swelling number of property transfers has also led to higher collection of capital gains tax. According to the department, the government earned Rs 130.17 million in capital gains tax in the first quarter compared to Rs 100 million in the same period last year.

The number of land revenue offices (LROs) collecting capital gains tax also rose this year. Among the LROs collecting capital gains tax in the review period are Belbari, Morang, Bara, Mahottari, Saptari, Rautahat, Udaypur, Sindhupalchok, Kavre, Kathmandu (Dilli Bazaar), Kalanki, Chabahil, Lalitpur and Bhaktapur. Other LROs are Dhading, Myagdi, Tanahun, Argakhanchi, Kapilvastu, Kawasoti, Surkhet and Tikapur.

In the first quarter last year, only the LROs based in Kavre, Kathmandu, Kalanki, Lalitpur, Myagdi, Banke and Kapilvastu raised capital gains tax. The government imposes a capital gains tax of 10 percent on property transfers. The realty business had gone into a slump after banks and financial institutions (BFIs) started reducing their lending exposure to the sector in mid-2009. Real estate is presently on a rebound.

The World Bank in its recent Nepal Development Update report said that the loan exposure of commercial banks to real estate decreased to a historically low level of 14.9 percent at the end of the last fiscal year from the previous fiscal’s 17.1 percent.

As a result, in fiscal 2012-13, only six commercial banks (16 percent of the system) had exposure to real estate in excess of 20 percent, against 13 banks (33 percent of the system) in the previous fiscal. “None of banks has real estate exposure in excess of 25 percent,” said the report.

Meanwhile, central bank officials said that the possibility of systemic risk to the banking sector from problems in the realty sector was now over.

source: the kathmandu post,12 Nov 2013