Revenue collection from realty transactions at the five Land Revenue Offices (LROs) in the Kathmandu Valley were down 58.28 percent in the fifth month of the current fiscal year compared to the same period in the previous fiscal. The LROs collected Rs 641.53 million in registration taxes against Rs 1.53 billion previously.

 Collection During First Five Months

LRO            FY 2010-11            FY 2009-10

Dillibazaar  Rs 245.49 million       Rs 501.49 million

Chabahil     Rs 140.52 million         Rs 346.66 million

Kalanki      Rs 90.18 million         Rs 245.13 million

Lalitpur     Rs 93.53 million         Rs 259.23 million

Bhaktapur    Rs 71.79 million        Rs 185.4 million

Total        Rs 641.53 million         Rs 1.53 billion

Realty transactions had slowed after Nepal Rastra Bank (NRB) capped lending to the sector last year. The new monetary policy has been flexible on credit to housing but stringent on land transactions. The loan exposure of banks to the housing sector has been limited to 25 percent and to realty to 10 percent.

The income source disclosure requirement for land transactions worth more than Rs 3 million and house transactions worth more than Rs 5 million and the capital gains tax have also discouraged real estate trading.

While transactions dropped from mid-October to mid-November due to the festive season, they bounced back from mid-November to mid-December.

“If we study past trends, transactions decline heavily from mid-October to mid-November and pick up from mid-November to mid-December. But at this point in time, we cannot predict what will happen in the days to come,” said Raju Basnet, section officer at the Department of Land Reform and Management (DoLRM).

Vice president of the Nepal Land and Housing Developers Association Ichha Bahadur Wagle said that the growth in transactions was a result of buying by people who needed to do it. “Previously, people used to buy land to increase their capital. But now, transactions have increased because of the purchase by people who had a serious necessity,” added Wagle.

However, big developers are still staying away. “It can’t be denied that the figures have gone up compared to the past. However, the directives issued by NRB have made big developers stay on the sidelines,” added Wagle. 

Despite a rise in transactions from mid-November to mid-December, the overall volume over the first five months of the current fiscal year was down by more than half. LRO Dillibazaar, the biggest land revenue collector in the country, saw its collection drop to Rs 245.49 million in the five-month period compared to Rs 501.49 million during the same period last year.

Revenue collection declined by 59.46 percent at LRO Chabahil, 63.21 percent at LRO Kalanki, 63.91 percent at LRO Lalitpur and 61.27 percent at LRO Bhaktapur.

“Our target for the period mid-November to mid-December was Rs 560 million, but we were able to collect Rs 270 million only,” said Gobinda Prasad Sapkota, director at the DoLRM.

The Ministry of Finance has fixed the target of collecting Rs 6.30 billion in revenue from the realty sector this year.

source: The kathmandu post (2010),"Revenue dips with slump in real state transactions", The Kathmandu post: Money, page.2