Govt lifts conditions for land fragmentations to increase financial transactions in the country

Published On: April 18, 2023 09:40 PM NPT By: Republica | @RepublicaNepal

Land Use Regulations 2022 asks banks to issue loans only after land plots are categorized

KATHMANDU, April 18: The government has lifted a ban on land fragmentation all across the country, citing that the step could help improve financial transactions, which has been in a slowdown.

A meeting of the Council of Ministers on Tuesday decided to scrap the provision that allows purchase/sale of land plots only after classifying the land. Introducing the Land Use Regulations 2022 last year, the Department of Land Management had asked land revenue offices around the nation not to fragment any piece of land without first classifying it and not to allow keeping those lands as collateral for loans until the classification has been done.

The new law has divided land into 10 categories based on their features and geographic situations. The land categories include agricultural, residential, commercial, industrial, mines, forests, public use and cultural-archeological, among others.

Following the government decision, the banks and financial institutions (BFIs) also started imposing restrictions on the transaction of land plots that have been used for securities. The new regulations maintain that the land plots cannot be used as securities unless they are classified as agriculture or non-agriculture categories.

The private sector has been expressing its dissatisfaction that the government policy helped take down the property transactions. “This not only halted the financial mobilization among the individuals and businesses, but also adversely affected the government revenue collection,” the private sector said.

Citing an increasing pressure from the private sector, Prime Minister Pushpa Kamal Dahal last week said his government will facilitate in promoting real estate transactions. “The government has realized that the liquidity problem in banks cannot be solved until the real estate businesses become vibrant. So, the government will soon reach a conclusion regarding the issue,” Dahal said during a meeting with bankers.

The regulation has envisioned completing the land classifications by the local government in the first six months from the date of enforcing the rule. It means the classification process needed to be done by December 2022. However, only 161 local bodies have completed the task as of now.