Prior to the introduction of the Land Use Regulations, the plotting of land up to 855 square feet, equivalent to 2.5 aanas, was allowed in the Kathmandu Valley. With the new arrangement in place, it was increased to 1,403 square feet which is equivalent to 4.1 aanas.
With the government reversing its earlier decision, lands in the capital valley can be partioned up to 2.5 aanas. The new provision is expected to ease real estate business and partition of property. Earlier, the government had classified land into 10 zones–agricultural, residential, commercial, industrial, mines and mineral zone, forest zone, public use and open space zone, cultural and archaeological zone, importance, and others. As per the decision, MoLMCPA wrote to local governments to classify agricultural and non-agricultural lands. However, after locals in many areas across the country demanded their lands be classified as non-agricultural, local governments failed to classify lands as directed by the federal government. Of the 753 local units, only 160 were able to classify lands. Likewise, the government has also decided to extend the time for the local units to classify lands. According to people in the real estate and housing business, the lifting of restrictions related to classification on lands only cannot bring normalcy to the realty business. "The business directly depends upon financing and interest rates. As the economy is in the doldrums, we are not excited that the real estate business will see a sudden rise,” said Iccha Bahadur Wagle, President of Nepal Land and Housing Developers' Association. “Currently, the loan-to-value ratio for real estate is at 30 percent. Also, the interest rate is massive. In these difficult times, it is less likely that real estate business will see a rise." According to him, the banks previously used to offer loans of 50 percent of the real estate valuation which has now come down to 30 percent. "This means customers are now required to invest 70 percent of the money themselves which is difficult for many to bear in a single payment,” Wagle told the Annapurna Express. “This is the reason why the real estate sector is in a massive downfall.” Commenting on the loan-to-value ratio, Wagle further said that the ratio should be fixed at 50 to 60 percent as consumers are not able to invest a huge amount at once. “If the loan-to-value ratio is increased, the real estate sector would revive in just 10 days.” Similarly, realty sector businesspersons also demand loans at a single-digit interest rate from banks. “Lately, banks have reported increased liquidity. However, the interest rate on loans has not been reduced.” Recently, the Nepal Bankers’ Association decided to reduce the interest rate on deposits to single digits, but no decision has been made on the interest rate of loans. According to Wagle, real estate transactions declined by up to 85 percent after the introduction of the Land Use Regulations.
