Property dealing without taking license will be slapped cash fine of up to Rs 1 million
KATHMANDU, Feb 15: The government is making preparations for mandatory use of operating licenses to carry out real estate transactions.
In this regard, the government has registered a bill to amend the Land Tax Act 1978 at the House of Representatives. The budget announcement for the fiscal year 2022/23 has also talked about regulating the property transactions.
An individual or a firm wishing to acquire property business license needs to apply with the necessary documents and prescribed fee at the authorities assigned in the Nepal Gazette, reads the bill forwarded to the parliament. The issued license will be valid for a period of five years.
The proposed act has sought to take stern action against those who will breach the state law. Given the transaction amount if defined, the cash penalty will be charged as per the amount in question. If the amount is not certain, then the property traders without license will be slapped with a cash penalty of Rs 1 million.
The government, through the annual budget, has already increased the capital gains tax on real estate transactions, to 7.5 percent from five percent, if the property is owned for less than five years. Given the property is owned for more than five years, the tax rate has been maintained at five percent, up from 2.5 percent earlier.
As per the law, the sale price and profit of any house or land can be self-declared by the owner concerned. However, the declared price should not be less than the assessment amount fixed by the government.
As of now, an individual or a non-registered firm has been allowed to do transactions of real estate. With informal trading, the government has been losing a notable amount of revenue from this sector.
Citing this business as an unproductive sector, the government has stepped up tightening its noose on the real estate sector. It has been a lucrative sector that witnessed a price rise by 3.82 percent in the fiscal year 2021/22, compared to 2.25 percent in the previous year, according to the Economic Survey 2022/23.
Currently, the law relating to property is protected under Part 4 of the Civil Code, 2018, which facilitates solving any dispute that is related to property trading. However, the existing law has many shortcomings, said Shanker Man Singh, former chief executive officer of Nepal Stock Exchange and former executive director of Special Economic Zone Development Committee.