Realty transactions in the capital have dropped by almost 25 percent in the first 10 months of the current fiscal year. Statistics for the period under review show a substantial decline in revenue collection at all the five Land Revenue Offices (LROs) in the valley. These LROs received Rs. 2.66 billion compared to Rs. 3.53 billion in the same period last year.

"The slowdown in revenue collection is the outcome of government provisions," said Narayan Prasad Adhikary, director at the Department of Land Reform and Management. "New government measures such as income disclosure have made people wary of investing in real estate and housing."

Realty developers attribute the drop in revenue collection to Nepal Rastra Bank's cap on realty loan exposure by commercial banks, provision of income source disclosure and imposition of capital gains tax on realty transactions.

Currently, anyone buying or selling land has to pay a tax of 10 percent of the total cost. Likewise, income disclosure is compulsory while buying land worth more than Rs. 3 million and houses worth more than Rs. 5 million.

Following the central bank's directives in December, banks and financial institutions have tightened their lending to the housing and real estate sector. Realty developers say that reluctance on the part of banks to finance new projects has affected the whole business. Further, a liquidity crunch in the banking system has also hit credit availability.

Transactions at the Dilli Bazaar LRO declined by a whopping 34.24 percent in the first 10 months. This office collected Rs. 848.39 million in the first 10 months of the current fiscal year against Rs. 1.29 billion last year.

Chief of the Dilli Bazaar LRO Hari Krishna Timilsina said that the number of people coming for land registration had also gone down. Earlier, around 350 people used to visit the office daily for land registration which has declined to 70-80 these days.

"A boom in the realty sector led to a surge in land registrations last year," said Timilsina. "However, with the new strict provisions, the realty business has gone down leading to a decline in land registration."  Ditto at the other four LROs. Revenue collection at the Chabahil LRO dipped by 26.93 percent this year. The office collected Rs. 605.24 million against Rs. 828.32 million last year.

Likewise, revenue collection at the Kalanki LRO has gone down by almost 20 percent. The office collected Rs. 416.62 million this year compared to Rs. 520.02 million last year.

Revenue collection at the Bhaktapur and Lalitpur LROs was also down in the first 10 months of the current fiscal year.

REVENUE COLLECTION IN FIRST 10 MONTHS

Lro                     2009/10              2008/09

Kathmandu    848.39 million    1.29 billion

Chabahil         605.24 million    828.32 million

Kalanki           416.62 million     520.02 million

Lalitpur           446.74 million    521.48 million

Bhaktapur     352.21 million      373.52 million

Total              2.66 billion             3.53 billion

courtesy:The Kathmandu Post