Real estate entrepreneurs are dissatisfied with the fact that applications for licenses must be submitted by November 11, and that they are trying to regulate only transactions conducted through companies.
What you should know
Since the provision was made mandatory for companies involved in real estate transactions to obtain a license, 140 companies have applied so far. The government had issued a notification in the Gazette on 27 Ashoja, requiring companies involved in real estate transactions worth more than 30 million rupees at a time to obtain a license.
Real estate companies must apply for a license by 14 November, said Ganesh Prasad Bhatta, spokesperson for the Ministry of Land Management.
‘So far, 140 companies have applied for a license,’ he said, ‘and the process of applying is ongoing.’ The government has made arrangements for the immediate purchase and sale of real estate worth more than Rs 30 million at a time through companies in metropolitan and sub-metropolitan cities across the country.
The government has published a notice in the Gazette for the purposes of Section 26 (a) and (b) of the Land Revenue Act. Section 26 (a) of the Land Revenue Act states that a license is required to be obtained for real estate transactions. The section states that a license is required to be obtained for real estate transactions exceeding the area or amount specified in the notice published in the Gazette by the government.
It is mentioned that an application for a license is required to be submitted in Section 26 (b) of the Act. Sub-section 1 of Section 26, ‘B’ states that a person who wants to obtain a license to conduct real estate transactions should submit an application to the designated authority by the government by publishing a notice in the Nepal Gazette along with the prescribed details, documents and fees. The Director General of the Department of Land Management and Records has been designated as such authority.
Sub-section 3 of the same section states that if the application received is found to be reasonable, the concerned authority should issue a license to conduct real estate transactions to the applicant, stating the prescribed conditions. The term of the license is stated in Sub-section 4 of Section 26, ‘B’, that it will be for five years. Sub-section ‘J’ of Section 23 of the Land Revenue Regulations, 2036 states that a person who wants to obtain a license to conduct real estate transactions between natural and legal persons or between legal persons, as per Sub-section ‘A’ of Section 26 of the Land Revenue Act, should submit an application to the designated authority.
When submitting an application, a copy of the company or firm registration certificate for the purpose of conducting real estate transactions, a copy of the company's articles of association and a copy of the updated share register must be submitted. The regulations state that a copy of the permanent account number registration certificate, a copy of the company or firm's tax payment certificate for the last fiscal year, and a detailed business plan of the company or firm must be submitted along with the application.
The regulations state that a copy of the decision of the company or firm's board of directors and the company or firm's website, email and contact person number must be submitted to obtain a license for real estate transactions. After receiving the application, the Director General of the department will investigate whether the documents have been submitted according to the required criteria and will be asked to pay the revenue after being 'qualified', said spokesperson Bhatta.
Once the license is decided, the firm or company will have to pay a fee of Rs 50 million for those who transact up to Rs 50 million at a time and Rs 1 million for those who transact any amount less than or more than Rs 50 million at a time, the regulations state.
Real estate entrepreneurs have expressed dissatisfaction, saying that the government is trying to regulate only real estate transactions through companies. Bishnu Ghimire, president of the Nepal Real Estate and Housing Development Federation, expressed dissatisfaction, saying that a license is mandatory for those doing business through companies but not for individuals. ‘We were also happy that the real estate transaction will be transparent and organized after the license,’ he said, ‘but the system is different from what we expected.’
He said that a system has been introduced that requires companies with transactions of more than Rs 30 million to obtain a license, but individuals do not. ‘When doing business through companies, 25 percent of the revenue from the profit goes to the government, and when individuals do business, they have to pay 7.5 percent of the profit tax,’ he said, ‘but the government made a license mandatory for companies that pay 25 percent of the profit. But how can real estate transactions be organized with a system that says that individuals who pay 7.5 percent do not have to obtain a license? It has become even more chaotic. Looking at this, it is understandable that we should close the company and trade individually.'
Ghimire said that everyone will take a license since the government has brought a system of licenses to organize it. 'There are a few days left after the government extended the time,' he said, 'Since the government has brought it to organize the real estate transaction, we had to take a license. There had to be a company that does real estate transactions. The company had to take a license. It had to be given priority.'
Spokesperson Bhatta said that a license has been made mandatory for real estate transactions of more than Rs 30 million between individuals and companies, and between companies. 'Immediately, no license is required for real estate transactions between individuals,' he said. He said that there is currently an effort to regulate transactions through companies. 'The idea is to gradually bring transactions between individuals into the formal land market structure,' he said.
