The government has made it mandatory for realty developers and individuals dealing in property worth more than Rs 5 million to transact through bank checks. It has also authorized land revenue offices (LROs) across the country to buy land and houses in case they find the transactions undervalued. The new provisions came into effect from Thursday. “Buyers of land and housing worth Rs 5 million will, henceforth, require to make payment through good for payment checks,” said Keshar Bahadur Baniya, Director General of Department of Land Reforms and Management (DoLRM). Likewise, to check widespread practice of undervaluing property deals in papers, the Ministry of Land Reforms and Management (MoLRM) has directed the LROs to acquire the property themselves. “Ministry of Finance (MoF) will pay for such procurements. Property thus taken over will be used by the government for various public purposes,” reads the directive that the ministry issued to the department and LROs. Both these provisions were long pushed by the Ministry of Finance. While the former provision was pushed for addressing the long-running liquidity crunch in the banking system, keeping track of the movement of property and formally monitoring the sources and transfer of income, the latter is expected to check undervaluation of realty transactions, something which has been causing revenue leakage in huge volume. Most importantly, the banking transactions will free buyers as well as sellers from the burden of carrying cash, thereby easing transactions and ensuring safety for both. However, land and housing developers argued it could also turn the market jittery. Their anxiety comes from the fact that property deals in Nepal are so far done in an informal way and buyers believe transactions through the banks would put them on record, enabling the state to identify their property holdings and seek out the sources of income. This general psychology may discourage new purchases, said developers. Officials of DoLRM - who resisted the new provisions - also argued that their implementation was still difficult. They mainly tagged the practice of paying commitment fees at the time of bookings, which can be done anywhere and gives room for buyers and sellers to manipulate the total trading amount, as a major obstacle to its enforcement. “Unless we streamline the realty trading procedures, the existing practice will make it difficult for the LROs to ascertain whether a deal is valued over Rs 5 million,” said he. The officials said enforcement of the second provision would be difficult, especially as there are no public evaluators in the country. “Without public evaluators, LROs will simply not be able to ascertain whether a deal is undervalued. In such a situation, how will an LRO take over a property?”
Source: Republica