Collection of land revenue in the Kathmandu Valley declined by 26 percent in the fiscal year 2009/10 in comparison to the previous fiscal due to a drop in real estate transactions.

Stakeholders in the realty sector said tightening of credit by banks and financial institutions (BFIs), imposition of capital gains tax and provision of income source disclosure contributed to the slump.

Statistics of the Department of Land Reform and Management (DOLRM) show that the five Land Revenue Offices (LROs) in the valley collected Rs. 2.97 billion in taxes compared to Rs. 4.04 billion in the previous fiscal.

LRO Dilli Bazaar, one of the major LROs, collected Rs. 936.69 million last fiscal against Rs. 1.46 billion previously. Likewise, LRO Kalanki posted Rs. 451.27 million against Rs. 602.1 million a year ago. Transactions at the LRO Kalanki declined by almost 25 percent.

LRO Chabahil witnessed a decline of 28 percent in revenue collection. The LRO took in Rs. 671.75 million compared to Rs. 944.48 million previously.

Similarly, LROs in Bhaktapur and Lalitpur saw a decline. LRO Bhaktapur collected Rs. 386.74 million (Rs. 427.48 million previously) while LRO Lalitpur received Rs. 527.52 million (down from Rs. 613.64 million a year ago).

 DOLRM director Gobinda Prasad Sapkota told the Post that the decline in revenue collection was a result of new directives issued by Nepal Rastra Bank that discouraged excessive lending to the realty sector.

The central bank had barred BFIs from issuing more than 40 percent of their loans to the realty sector in the last fiscal year.

They are required to bring this down to 25 percent by the end of the next fiscal.

Currently, buyers and sellers of land have to pay a tax of 10 percent of its value. Likewise, income disclosure is compulsory while buying land worth more than Rs. 3 million and houses worth more than Rs. 5 million.

source: Kathmandu Post (2010),"Valley land revenue dips",The Kathmandu Post, 27 July 2010