Bill made to establish Commercial Trade of Real Estate Act, 2065

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March 20, 2012, 5:45 p.m. Published in Magazine Issue: Vol.: 05 No. -17 Mar. 16-2012 (Chaitra 03, 2068)<BR>

A well managed human settlement indicates how civilized and efficient the corresponding individual, society or country is. History shows wherever there have been planned settlements and towns such towns developed as centers of human civilization, religion, culture and tradition. Nepal also has well planned and organized settlements and towns according to the specific geography. Although it is difficult to pin point exactly when these towns and settlements were established it was primarily during the rule of the Lichivi, Malla, and the Shah dynasty.


With the increasing population and the pressure it creates on resources, people are constantly migrating to other settlements in search of better facilities. Likewise due to Nepal’s challenging and remote geography, areas that are suitable for human habitation are decreasing day by day because of property (land) divisions between the family members. In addition to this because of the lack of properly planned attempts to develop new settlements around older established towns it is helping to degrade these historical areas day by day. The problem however cannot be solved by the government alone or by an individual. To resolve the issue permanently private investors must be attracted to be involved in properly planned commercial ventures in real estate development. This bill to establish the commercial trading of real estate act 2065 was proposed keeping this fact in mind.


Planned settlement development in Nepal and legal provisions related to it


a) The government has to some extent been involved in the process of planned settlement development in Nepal. Government efforts to rehabilitate people in the districts to more planned settlements began around 2025/26 BS. The project aimed to settle people in land owned by the government. Later other projects were made by the central government and local agencies to incorporate government and private land around towns and villages that were on their way to becoming towns with the intention of settling people there. The Land Acquisition Act 2034 was duly created for the benefit of the people so that settlements can be established in a planned manner and if the government deems necessary to acquire private land it could legally pay the appropriate compensation to the owners while acquiring it.


However as the Land Acquisition Act 2034 alone was insufficient to go about the business of establishing settlements in a planned manner it was found that the Town Development Act 2045 and the Kathmandu Valley Development Corporation Act 2045 were established on 16 November 1988. These Acts have helped to develop various new towns around the country as well as in Kathmandu Valley in a planned manner. However it is also a reality that these Acts alone are insufficient to meet the demands that have increased according to the change in time. As the Acts are completely executed and implemented by the government agencies we can clearly see how it has made it difficult to move ahead according to time.


b) Although both the Acts were brought in to aid in developing new settlements in a planned manner so that the challenges posed by the increasing population and urbanization could be handled while ensuring that historically significant old parts of the cities and towns be conserved and rebuilt, it was unable to reach out to all district headquarters and areas that were slowly being urbanized. Neither can these acts address the problems of today.


c) Land prices have risen sharply over the years due to a variety of reasons; lack of land to develop settlements in most of the district headquarters in the hills due to the geographical challenges posed by the location, excess population pressure. The United Housing Ownership Act 2054 established in 2054/9/7 seems to have been brought about with the aim of allowing as many people as possible to live within the limited spaces available in cities. In this regard in order to ensure that residential buildings built then onwards be fire, earthquake, and other natural disaster proof and to regulate building construction in a scientific manner the Building Act 2055 was established. However because the Act is urban centric it has been ineffective in effectively addressing nationwide problems of villages and towns becoming increasingly urban.


d)  In the current age of free market economy projects implemented by the state or state agencies alone are insufficient to match the fast pace of development. Realizing the necessity to encourage the private sector to invest in various sectors to take infrastructure development forward the Private Investment in Infrastructure Construction and Operation Act 2066 was created. The preamble of the Act provides for the construction of multi residential buildings. Although the government has not already received the help it expected from the private sector to invest in such projects it might be a little to early to comment on the Act. 


4. Problems and Necessities

a) Problems

All district headquarters, areas that are getting urbanized and villages have some common problems such as:

1) the population is increasing creating more pressure

2) It is getting more and more difficult for people to have sustainable livelihoods based on traditional agriculture, cattle raising or other works especially in the villages

3) More and more people are migrating to urban areas seeking education, health, peace and security, employment, and other services and facilities that are not available in the villages

4) There is insufficient land for residential/real estate purposes around cities and villages that are getting urbanized

5) Due to limited land especially for residential purposes even agriculturally productive land is getting used to develop real estate

6) Land is increasingly being divided among inheritance claimants

7) There is a lack of planned investment to develop new settlements and create infrastructures where many people can live in limited space


Lack of Investment and Necessity

The population density in district headquarters and villages that are slowly getting urbanized is increasing due to the increase in both local population and migration from various areas due to different reasons. This is creating problems to arrange proper housing and residences. This issue needs to addressed in a planned manner and the housing problems resolved as soon as possible.

2) It is not possible to resolve the above mentioned issues using the state’s resources alone. Appropriate laws should therefore be made to create an atmosphere for the private sector to invest.

3) A large amount of investment would be required to properly plan and build affordable housing and the necessary infrastructure so proper laws must be made to guarantee that investments made by the private sector in this area is safe.


a) Why this bill?

Lack of properly planned housing and residences is a problem in all the urban areas and even villages that are getting urbanized in the country. Although it is getting late to start trying to resolve the problem, it is still not too late to start to do something. What is clear is that a large investment and proper planning is necessary. There is therefore no other alternative than to encourage private investors to invest in this sector in a commercial manner. This is the demand of time. This Bill made to establish Commercial Trade of Real Estate Act, 2065 was proposed for this very reason.


b) What are the main points in the Bill

1. Preamble

Whereas it has become essential to form necessary laws to provide for and manage residential housing for people in cities, towns and areas that are slowly getting urbanized, in a planned manner so that the private sector can be encouraged to invest in its commercial trade,


Proposed preamble:

The preamble of any proposed act justifies the reason, aim, spirit, and working area in a clear manner. This preamble has been prepared likewise:


“Whereas it has become essential to form necessary legal provisions to encourage the private sector to invest in the commercial trade of residential housing due to the increasing population density, settlement with modern facilities, and fast paced migration that is causing cities, towns and areas that are slowly getting urbanized to become increasingly chaotic, to properly manage such areas and make the maximum use of such areas,”

2) Article 2 (c ) makes it mandatory to do plotting and prohibits individuals from conducting the business alone

3) Article 5 makes it mandatory for the government to create necessary laws regarding required investment and technical capacity.

4) Article 13 (1) provides for the projects to be implemented with the agreement of the local agency and the government if such projects cannot be conducted without using public or government owned land. However it does not clarify what kind of management is to be used when building residences in public or government land.


To be added

13(7) Certain fixed percentage of amounts received from the sale of residences built in public or government land must be deposited with the government or the local agency and used for the social welfare of the same area.

5) Article 14 makes it mandatory for the project to be permitted by the concerned agency.

6) Article 19 provides for reservation in the housing for low income individuals. The amount in “low income” will be specified as per the law.

7) Article 20 says that items/facilities and land of public concern must be separated for the same purpose.

8) Article 20(4) mentions that if there are public roads that are not used, alternative routes of the same size can be proposed and the former land used. (This provision contradicts the provision no 4. of the Muluki Ain related to settling land)


To be added

Article 20 (4) (a) must be added. When preparing plans if there are public roads permits must be sought from the local authority to use the land and replace it with an alternative route of the same size outside the project area.

Article 20 (4) (b): If there are any public roads within the project area and if such roads are deemed unnecessary while implementing the project, the permit holder must put aside the land covered by the road for some other public use.


9) Article 22(1) gives for the project executor the authority to arrange for the mapping, maintain balance, and change whatever is necessary inside the project area.


10) Article 24 provides for an authorized person to cancel the project if the permit holder does not work according to Article 16, but the justification must be clear.


11) Article 25 has freed the limit on size of land to be used.


12)  At least 100 families should be able to live within 2.5 hectors
Discount in fees: Article 27 provides for a discount in fees when fixing the map and maintaining balance


13) As per Article 29 the decision of the ministry will be final in whatever complaints are eligible to be filed in the ministry. Punishment: As per Article 30 if work is conducted without permit papers or contradictory to what has been permitted a fine of Rs 0.5 million can be imposed. This case can also be filed in the appellate court.


14) Article 32 (1) provides for compensation to the buyer if the house/resident bought from the permit holder is damaged within 3 years. Article 32 (1) provides for any compensation to any damages done.


15) There are provisions requiring the Nepal government to make necessary laws.


6. Suggestions

It is not difficult for everyone to understand that due to Nepal’s geographical complexity there is a lack of appropriate residential/housing land in the hills than in the southern plains of the Tarai. Usually in these (hill) areas the land is either community forests, Guthi owned, and other public land. Such land must be used. Article 13 is inadequate in addressing this and talks must be held with the concerned agencies to resolve this issue. Practical approaches must be taken while planning settlement development, plotting, leaving open public spaces for sports, social functions, and other public utilities.


This investigate report has been prepared by advocate Shyam Dhungel for the Nepal Constitution Foundation with inputs from women, Janajati, Dalit, Madhesi, Youth, and other pressure groups. The Foundation is grateful to Meera Gurung, Min Bahadur Tama, Govinda Sapkota, Krishna Bhakta Lama, Bhisma Pandey, Ghyamjo Lama, Palden Lama, Ganesh Dutta Bhatta, Bheshraj Lohani, Lalit Chaudhary, Devkumar Moktan, Narayan Prasad Dhakal, Chinkaji Maharjan, Bhupendra Hujdar, Pratik Neupane, Yadunath Khanal, R B Limbu, Basanta Acharya, Shirshak Ghimire, Abhishek Adhikari, and Dr. Bipin Adhikari.


The research has been supported by The Asia Foundation. Views and opinions expressed in this report are of the authors and don’t necessarily reflects of The Asia Foundation.

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