Slowdown in the real estate business has generated a wave of financial crime and contributed significantly to escalacation of several other offenses, according to police.

The realty bubble had burst after Nepal Rastra Bank intervened to curb investment in the sector by financial institutions. The slowdown, officials opine, derailed the whole spectrum of transactions and is now breeding crime.


"A majority of complaints we receive are essentially related to financial problems arising out of real estate," said Superintendent of Police (SP) Dinesh Amatya at Metropolitan Police Crime Division (MPCD).

According to him, MPCD has been receiving five to 10 complaints about bounced checks every day over the last six months and most of them are from those involved in real estate deals.

Issuing an invalid check is an offense under the Banking Crime Act 2006. Besides cases of deliberate issue of such checks, police now advise people to force bankrupt parties into issuing such checks so that victims could then lodge a complaint invoking the banking crime act.

The downturn has also escalated cases of fraud. Police generally prosecute fraud cases straightaway as per the Muluki Ain but a good many cases qualify as both banking crime and fraud, courtesy the bounced checks.

"Around 100 cases a month of financial crime, particularly stemming from real estate, is an overwhelming number," said Amatya. "A broader picture of financial crime related to real estate has not emerged as people generally tend to go to the police only after a certain period of patience and other efforts at a solution fail."

Such complaints abound at every police unit authorized to prosecute criminal cases. Metropolitan Police Range Kathmandu (MPRK) receives at least two such complaints every day. Five Circle offices under MPRK have a similar record.

There are cases involving bounced checks of up to Rs 50 million. The office, like other such entities, has not maintained a complete database of cases or of the total monetary figures involved.

Nepal Police is not legally authorized to take over cases of financial transactions that are meant rather for the courts. However, they are usually entertained in the form of fraud cases or, lately, as banking crime and police units are criticized for allegedly taking undue financial benefit from such cases.

Police tend to resolve cases through discussions among disputing parties. So, the least number of cases have reached the courts. MPRK prosecuted only 11 cases of bounced checks over the last three months. "As the court procedures are not sufficiently effective, the victims themselves seek solutions through mediation," officials said.

It is not only the police who are flooded with cases stemming from the dwindling real estate sector, police officials argued. Sister organizations of political parties and gangsters are also believed to have taken huge advantage of disputes.

"If we ignore the cases, the victims will turn to those groups and that could trigger other crime like kidnapping, extortion and intimidation," said an official.

Institutional involvement

Saroj Bajracharya, 45, a branch manager of Samjhana Finance Limited of Lalitpur, was arrested by MPCD a few days ago for allegedly issuing a ´good for payment´ check that bounced. The check worth Rs 9.5 million was issued to Patanjali Yoga Peeth and Ayurved Company in connection with a deal concerning land owned by the latter in Kavre.

Investigative officials said that many financial institutions are suffering from defunct transactions due to the realty slowdown and now have most of their investment at risk. "After a couple of months, we may have to handle plenty of cases of financial crime involving financial institutions," said a senior police official.

source:Khanal, S. (2010),"Realty slowdown spurs financial crime ",republica, 15 September 2010