KATHMANDU: The Government of Nepal has introduced significant amendments to land laws through an ordinance, aimed at providing much-needed relief to real estate developers. This legislative move is expected to address longstanding challenges faced by real estate businesses, particularly regarding the restrictions on selling land beyond the legally prescribed ceiling.
The ordinance, which amends several land-related acts, enables nearly a dozen real estate companies to sell approximately 1,000 ropanis of land. This decision marks a critical turning point for the real estate sector, offering a more business-friendly environment while ensuring compliance with regulatory provisions. Developers who previously struggled due to unclear policies and restrictive practices have welcomed the changes, anticipating smoother operations and reduced bureaucratic hurdles.
Under the revised regulations, real estate developers can now acquire approval to hold and develop land exceeding the legal ceiling, provided they transform the land into housing plots within a stipulated timeframe. However, the ordinance maintains a strict prohibition on using land designated for public purposes as collateral or for sale, ensuring that public welfare is not compromised.
Previously, the land ceiling laws posed challenges to real estate companies, particularly those backed by significant investments from Nepal’s major business groups. Developers reported difficulties in liquidating their assets due to the ambiguous legal framework, which often led to stalled projects. For example, one developer revealed that nearly 1,000 ropanis of land across a dozen companies had been rendered unsellable due to existing restrictions.
This situation was exacerbated by the implementation of the Land Records Information Management System (LRIMS), a digital platform rolled out in 2015 to streamline land transactions. By 2021, the system had been adopted nationwide, automatically flagging land ownership exceeding legal limits and preventing such transactions. While the system improved transparency and accountability, it also created bottlenecks for real estate businesses, many of which found themselves unable to proceed with planned projects.
Developers have long expressed dissatisfaction with the cumbersome processes required to comply with the land ceiling laws. Several companies resorted to establishing multiple entities to bypass the limitations, leading to increased costs and operational complexities. One developer disclosed that their housing project in Kathmandu required the creation of 13 separate companies to acquire land, resulting in significant documentation challenges and additional administrative burdens.
The amended ordinance simplifies these processes, offering real estate developers a more streamlined path to project completion. By reducing the ceiling for landholdings in the Kathmandu Valley to 10 ropanis, while allowing up to 50 ropanis for housing projects and maintaining higher limits for other regions, the government has addressed some of the sector’s key concerns. This move is expected to encourage investment in urban housing projects, supporting Nepal’s growing demand for real estate development.
Despite these positive developments, some restrictions remain. The ordinance prohibits using land exempted from the ceiling as collateral with banks and financial institutions. This provision has drawn criticism from developers, who argue that it limits their ability to secure financing for new projects. Industry representatives have called for further revisions to enable more flexible financial arrangements, emphasizing that such changes are essential to fostering a thriving real estate sector.
The challenges faced by real estate developers highlight broader issues within Nepal’s regulatory framework. While the government has introduced reforms to promote economic growth and attract foreign direct investment (FDI), inconsistencies and ambiguities in policy implementation continue to hinder progress.
Developers have urged the government to adopt a more holistic approach, addressing not only land-related issues but also broader economic policies to create a more conducive environment for business.
The real estate sector is a critical driver of Nepal’s economy, contributing significantly to employment generation, infrastructure development, and urbanization. However, the sector has often been hampered by outdated regulations and bureaucratic inefficiencies. The recent amendments mark a step forward in addressing these challenges, but further reforms will be necessary to unlock the sector’s full potential.
As Nepal seeks to position itself as a hub for business and investment, the government’s approach to real estate development will play a crucial role in shaping the country’s economic future. Policies that balance the needs of developers with broader social and environmental considerations are essential to ensuring sustainable growth. The amended ordinance is a positive step in this direction, offering hope for a more dynamic and resilient real estate sector in Nepal.
Real estate developers remain cautiously optimistic about the changes, acknowledging the government’s efforts while advocating for continued dialogue and collaboration. With the right policies and support, Nepal’s real estate sector has the potential to emerge as a cornerstone of the nation’s economic development, attracting both domestic and international investors.
As these changes take effect, all eyes will be on the real estate market to gauge the impact of the reforms on business operations, urban development, and the broader economy. For now, the amendments provide a much-needed boost to the sector, signaling a new chapter in Nepal’s journey toward economic progress and modernization.