The recently introduced “Ordinance to Amend Certain Nepal Acts Relating to Land,” certified by President Ram Chandra Paudel on January 15, has sparked significant debate among stakeholders.
The ordinance, which amends provisions of the Land Act, 1964, aims to address challenges faced by real estate businesses while introducing specific exemptions from land ceiling limits. Although the ordinance has come into effect, questions persist regarding its implementation, implications, and the broader consequences for Nepal’s land policy.
Among the provisions of the ordinance, one of the most discussed is the lack of a land ceiling limit for companies engaged in real estate business. Real estate entrepreneurs argue that previous legal frameworks imposed undue restrictions, hindering their operations.
According to Bheshraj Lohani, former president of the Nepal Land and Housing Development Federation, the prior system required businesses to navigate complex restrictions, often leading to the establishment of multiple companies to bypass the limits.
Under the previous framework, Lohani explains, a company could not exceed specific limits in land transactions. This restriction, compounded by the introduction of an online system at the Land Revenue Office in 2019, made it impossible for companies or individuals to engage in large-scale land transactions.
The software used by the office automatically flagged and restricted transactions exceeding the prescribed limit. Efforts to address these challenges, including the eighth amendment to the Land Act in 2019 and subsequent directives, failed to deliver the desired results.
The exemption directive of 2022, for instance, was criticized for being impractical, leaving many entrepreneurs unable to benefit from promised relief.
Real estate entrepreneurs have long contended that the ceiling limits are irrelevant for their sector. Unlike individuals purchasing land for personal use, these businesses acquire property to develop and sell, often contributing to urban development and economic growth.
Lohani and others argue that a practical guideline aligned with the newly introduced ordinance could significantly ease business operations and attract more investment in the sector.
However, skepticism remains regarding whether such a guideline will be issued promptly or effectively implemented. Lohani underscores the need for clarity and practicality in any directive stemming from the ordinance.
He also points out that, in the absence of an exemption provision until now, many businesses resorted to roundabout methods to operate. This included registering multiple companies to circumvent restrictions, a practice that added unnecessary complexity and operational challenges.
The ordinance’s provisions mark a departure from earlier attempts to regulate real estate transactions. By replacing Section 12 (g) of the Land Act, 1964, the new ordinance allows companies with permission to conduct real estate business to develop and sell land within limits specified by a notified order. These businesses can either construct houses or divide land into plots for sale, provided they adhere to existing laws. However, land designated for purposes other than real estate cannot be developed and sold without explicit approval from the Ministry.
The government has emphasized the ordinance’s potential to streamline real estate transactions and support investment.
Provisions in the ordinance align with Nepal’s broader efforts to facilitate business activities and attract international investment, as highlighted during the International Investment Conference held in April 2024. However, critics argue that the ordinance continues to include restrictive clauses, which could hinder its effectiveness.
Lohani recalls previous attempts to address these issues, such as the government’s decision in 2010 to remove land ceiling limits for real estate businesses. While this decision initially appeared promising, subsequent changes, including the introduction of the online land management system, rendered it ineffective. Similarly, the eighth amendment to the Land Act allowed for a one-time exemption from the ceiling, but its procedural complexities and restrictive directives prevented its practical implementation.
The recently introduced ordinance seeks to address these shortcomings by providing a clearer framework for land transactions.
Real estate businesses are optimistic about its potential to simplify operations and remove bureaucratic hurdles. However, concerns about the ordinance’s implementation persist, particularly regarding the issuance of practical and enforceable guidelines.
Lohani emphasizes that, for the ordinance to be effective, it must go beyond addressing immediate concerns and lay the groundwork for a sustainable and transparent real estate sector. He advocates for a practical directive that supports businesses while ensuring compliance with broader land management and development goals.
As the ordinance takes effect, its impact on Nepal’s real estate sector remains to be seen. Proponents argue that it represents a step forward in addressing long-standing challenges, while critics caution against overly optimistic expectations without proper implementation mechanisms. The debate underscores the need for a balanced approach that considers the interests of businesses, regulators, and the broader public.
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