An Overview of Real Estate Law in Nepal

Real estate law in Nepal is primarily governed by the Lands Act 2021 (1964) and the National Civil Code 2017. These laws regulate ownership, transfer, partition, inheritance, and management of land and property in Nepal. The Lands Act establishes procedures for land registration, measurement, and valuation. Meanwhile, the Civil Code provides a comprehensive framework for property rights, transactions, and dispute resolution.

Real estate law in Nepal covers both movable and immovable property. The Civil Code classifies property into categories like private, common, joint, community, public, government, and trust property. It outlines the rights and obligations associated with property ownership and possession.

The Major Provisions of Real Estate Law in Nepal are: Land ownership and Tenure, Property Registration and Transfer Procedures, Mortgage and lien regulations, Leasing and Rental Agreements, Land use and zoning rules, Property Taxation, and Dispute Resolution Mechanisms.

What is Real Estate in Nepal?

In the Nepali context, real estate primarily refers to land and any permanent structures or developments on it. This includes:

• Residential properties like houses and apartments
• Commercial properties such as office buildings and retail spaces
• Agricultural land
• Undeveloped plots of land

The National Civil Code 2017 defines immovable property to include:

• Buildings, land, and structures attached to them
• Mines, minerals, and natural water resources
• Trees, plants, and crops growing on land
• Any movable property attached to immovable property

Real estate transactions in Nepal often involve the buying, selling, leasing, or mortgaging of such immovable properties. The real estate market has grown significantly in urban areas like Kathmandu in recent decades, with increased demand for housing and commercial spaces.

Is Real Estate legal in Nepal?

Yes, real estate ownership and transactions are legal in Nepal, subject to various laws and regulations. The Constitution of Nepal 2015 recognizes the right to property as a fundamental right of citizens. However, there are some restrictions:

• Foreigners are generally not allowed to own real estate in Nepal, except for diplomatic missions or with special government permission.
• There are land ceiling limits on how much land an individual or family can own.
• Certain types of land, like forest areas or public spaces, cannot be privately owned.

Real estate transactions must comply with legal procedures outlined in the Lands Act and Civil Code. This includes proper registration of property transfers with the Land Revenue Office.

The government regulates the real estate sector through policies and institutions like the Ministry of Land Management, Cooperatives and Poverty Alleviation. While real estate business is legal, companies must obtain proper licenses and follow applicable laws.

How does Real Estate work in Nepal?

The real estate market in Nepal operates through various stakeholders and processes:

1. Property Owners: Individuals, families, or entities that hold legal title to land or buildings.
2. Buyers/Investors: Those looking to purchase property for personal use or investment.
3. Real Estate Agents/Brokers: Intermediaries who facilitate property transactions between buyers and sellers.
4. Banks/Financial Institutions: Provide mortgages and loans for property purchases.
5. Government Agencies: Land Revenue Offices handle property registration and transfer. Municipalities oversee building permits and zoning.
6. Developers: Companies that acquire land and construct residential or commercial projects.

Procedure for Real Estate Transfer in Nepal

• Property listing by owners or through agents
• Buyers searching for properties that meet their requirements
• Negotiation of price and terms between buyer and seller
• Due diligence to verify property ownership and legal status
• Execution of sale deed and registration with Land Revenue Office
• Payment transfer, often through bank loans
• Handover of property to the new owner

Real estate prices are influenced by factors like location, property type, infrastructure development, and market demand. Urban areas, especially in Kathmandu Valley, generally have higher property values compared to rural regions.

How to purchase a Real Estate in Nepal?

• Step 1: Search and Selection of Property
• Step 2: Agreement for Purchase of Property
• Step 3: Due Diligence of the Land
• Step 4: Drafting Documents and Payment of the Land
• Step 5: Registration and Transfer of the Land

Step 1: Search and Selection of Property

The individual must identify the desired location and the type of property. Once you’ve decided, research available properties using real estate agents, online listings, or personal networks. Its legal status must be verified by checking the ownership documents.

Step 2: Agreement for Purchase of Property

After the identification of property, the individuals can opt for signing a preliminary agreement or MOU to formalize the agreement before proceeding further.

Step 3: Due Diligence of the Land

Start by performing a thorough title search at the Land Revenue Office to confirm the property is legally owned by the seller. Ensure that the property is free of any liens or encumbrances. If necessary, obtain an official valuation from a certified valuer to confirm the property’s market value.

Step 4: Drafting Documents and Payment of the Land

Once due diligence is complete, the legal documentation process begins. Prepare the sale deed (Rajinama) according to legal standards. You will also need to arrange payment, which is often done via bank transfer or loan disbursement. During this stage, ensure all essential documents such as citizenship certificates and tax clearance certificates are in order.

Step 5: Registration and Transfer of the Land

The final step is to submit the sale deed and all required documents to the Land Revenue Office. You will need to pay the applicable registration fees and taxes. Once the registration process is complete, ownership of the property is officially transferred, and the buyer will receive the new title deed (Lalpurja) in their name.

How to transfer Real Estate in Nepal?

• Step 1: Preparation of Transfer Deed
• Step 2: Valuation of Property with Tax Assessment
• Step 3: Compilation of Documents
• Step 4: Submission to Land Revenue Office
• Step 5: Registration and New Ownership Certificate

Preparation of Transfer Deed

The first step in transferring real estate in Nepal is drafting a transfer deed, often referred to as a sale deed or “Rajinama.” The deed should include all essential details such as the property description, parties involved, and terms of the transfer. It must be prepared in the Nepali language and written on stamp paper to meet legal requirements.

Valuation and Tax Assessment

After preparing the deed, the next step involves determining the property’s value. This may require an official valuation, particularly for tax purposes. Taxes, including capital gains tax for the seller, need to be calculated at this stage. Tax clearance certificates must be obtained from the relevant authorities before proceeding with the transfer.

Document Compilation

Once the valuation and tax assessments are complete, gather all necessary documents. These typically include the citizenship certificates of the parties involved, the original title deed (Lalpurja), and tax receipts. If the property transfer involves a corporate entity, documents such as company registration and a board resolution must also be included.

Submission to Land Revenue Office

Submit the transfer deed and all supporting documents to the local Land Revenue Office. At this point, both the transferor and transferee must either be present or represented by authorized agents. Pay the required registration fees and taxes during this submission to finalize the legal process.

Registration and New Ownership Certificate

The Land Revenue Office officials will then verify the submitted documents and process the transfer. Once the registration is completed, the transfer is recorded in the official land records. Finally, a new title deed (Lalpurja) will be issued in the name of the new owner.

Mortgage of Property in Nepal

Mortgaging property in Nepal is governed by Chapter 12 of the National Civil Code 2017. The law recognizes two main types – mortgage with possession (Bhogbandaki) and mortgage without possession (Drishtibandhaki).

The Mortgage deed must be executed and registered with the Land Revenue Office. The mortgagee has the right to possess and enjoy the mortgaged property as per the terms of the deed. The law caps the interest rate on mortgages at 10% per annum.

Mortgage with possession cannot exceed 10 years, while mortgage without possession is limited to 5 years initially. The mortgagor has the right to redeem the property at any time by repaying the loan amount. If the mortgagor defaults, the mortgagee can initiate foreclosure proceedings through the court.

Pre-emption of Immovable Property in Nepal

Pre-emption rights for immovable property are outlined in Chapter 13 of the National Civil Code 2017. Pre-emption allows certain individuals to purchase a property in preference to others when it is being sold.

Neighboring property owners and close relatives (as defined in the law) have pre-emption rights. Pre-emption rights must be exercised within 35 days of the property sale registration. The person claiming pre-emption must deposit the full sale amount with the Land Revenue Office and file a petition.

Registration of Deeds in Nepal

Deed registration is a crucial aspect of real estate transactions in Nepal, governed by Chapter 14 of the National Civil Code 2017 and the Registration Act 2034 (1978). Land Revenue Offices are responsible for deed registration. Parties must appear before the registration officer, present the deed and supporting documents, and pay applicable fees. Generally, deeds should be registered within 35 days of execution. Registration fees are based on the property value and type of transaction.

What types of Deeds (लिखत) must be registered in Nepal?

According to Section 464 of the National Civil Code 2017, the following types of deeds must be registered:

1. Deeds transferring rights in immovable property (e.g., sale deeds, gift deeds)
2. Mortgage deeds (both with and without possession)
3. Deeds of testamentary gift of immovable property
4. Exchange deeds for immovable property
5. Partition deeds or deeds relinquishing partition share of common property
6. Deeds related to separation or unification of family members
7. Trust establishment deeds
8. Lease agreements for houses with monthly rent exceeding 100,000 rupees
9. Usufruct deeds for immovable property
10. Any other deed required to be registered by law

Failure to register these types of deeds can render them legally unenforceable.

Real Estate Services in Nepal

The Services available for Real Estate Sector of Nepal are:

• Mortgage Brokerage: Facilitators help clients obtain property loans from financial institutions.
• Property Brokerage: Agents facilitate buying, selling, and renting of properties.
• Property Development: Companies acquire land and develop residential or commercial projects.
• Property Management: Services for maintaining and operating real estate on behalf of owners.
• Valuation Services: Professional appraisers assess property values for various purposes.
• Legal Services: Lawyers specializing in real estate handle property-related legal matters.
• Surveying and Mapping: Professionals conduct land surveys and prepare property maps.
• Home Inspection: Experts assess the condition of properties before purchase.

Read More:

1. Real Estate Lawyers in Nepal
2. Property Lawyer in Nepal
3. Obtaining Building Permits in Nepal
4. Zoning Laws in Nepal
5. Nepali Property Law for Foreigners

Conclusion

Real estate law in Nepal provides a framework for property ownership, transfer, and development. While the legal system recognizes various property rights, it also imposes restrictions to balance individual and societal interests. The process of buying, selling, or mortgaging real estate involves multiple steps and legal requirements, emphasizing the importance of proper documentation and registration.

Frequently Asked Questions

Contact Real Estate Lawyer in Nepal

Disclaimer: This material is presented solely for informational purposes, without constituting legal advice, counsel, or solicitation, and no liability shall arise from any actions, omissions, or reliance on its contents, directly or indirectly, in any manner whatsoever, irrespective of the jurisdiction or specific circumstances.

Also Read: Land Act, 2021 (1964)