Revenue collection soars on sizzling realty businessReal estate transactions sizzled in the first half of the fiscal year with the collection of land registration fees soaring 150 percent compared to the same period last year.
Real estate transactions sizzled in the first half of the fiscal year with the collection of land registration fees soaring 150 percent compared to the same period last year.
According to the Department of Land Reform and Management (DoLRM), land revenue offices (LROs) across the country raked in Rs9.81 billion in registration fees, exceeding the government’s target of Rs7.02 billion by around 140 percent.
In the first six months of fiscal 2015-16, the country’s LROs had missed the target by a wide margin, collecting Rs3.92 billion against the goal of Rs5.98 billion.
Incomes at LROs dried up in 2015-16 due to a slowdown in business. While the government had aimed to collect Rs12 billion in taxes on land transactions during the year, they were able to collect just Rs11.9 billion.
This year, exhibiting a strong turnaround, LROs had achieved 70 percent of their annual revenue collection target of Rs14 billion by the first six months.
Even though revenue collection patterns would show that the property market is close to overheating, DoLRM officials have played down the surge in receipts.
“Collection figures shouldn’t be compared with the last fiscal year,” said Sushil Acharya, director of the planning division at the DoLRM. “Land transactions were lower than expected last year because of the impact of the 2015 earthquake in Kathmandu. People feared buying property in Kathmandu, and that is why the collection was lower than expected.”
The other major reason behind the slowdown in land sales is the economic blockade imposed by India last year. The blockade dealt a blow to the entire economy.
The DoLRM said that land transactions in the Kathmandu Valley were coming back on track. An increase in the tax rate has also led to a rise in collection after the downturn following the earthquake and economic blockade.
The department has increased the tax on land transactions in metropolitan cities to 5 percent from 4.5 percent, and to 4.5 percent from 4 percent in sub-metropolitan cities. Likewise, taxes in municipalities and village development committees have been jacked up to 4 percent from 3.5 percent.
“Though an increment of 0.5 percent doesn’t look like much, it has a huge impact on the overall figure,” Acharya said.
According to Acharya, land transactions in the Kathmandu Valley and other major cities like Pokhara, Biratnagar, Itahari, Chitwan, Nepalgunj and Butwal have helped to boost revenues.
While Kathmandu’s property market is always an investment moneymaker, as everybody desires to own a piece of land in the Capital with an eye on profits or a plan to settle here, other big cities in the country too have witnessed a growth in transactions due to swelling migration from rural to urban areas.
Remittance inflows have played a key role in increasing land transactions. People in villages and remote areas have more disposable income due to money sent home by migrant workers.
“As there are few investment opportunities in Nepal, the usual practice is to buy land, automobiles and gold, among other assets,” Acharya said.