Can a Foreigner buy Property in Nepal?

Foreigners are generally not permitted to directly purchase property in Nepal. The Land Act of Nepal restricts foreign ownership of land and real estate. According to Nepali law, only Nepali citizens and certain categories of companies registered in Nepal can own land and property.

However, there is an exception for foreign investors who want to establish a business in Nepal. Foreigners can incorporate a company in Nepal through the foreign direct investment (FDI) process and then purchase property for setting up and operating the business. This requires obtaining approval from the Department of Industry or Investment Board Nepal and following specific procedures.

The property ownership would be in the name of the Nepal-registered company, not the foreign individual. Additionally, the property can only be used for the approved business purposes. Foreigners cannot purchase residential property or land for personal use through this method.

Can a Foreign Company buy Property in Nepal?

Yes, foreign companies can buy property in Nepal, but with significant limitations and only for specific business purposes. The process requires government approval and must be done through a Nepal-registered company.

Foreign companies can purchase land and property in Nepal only after establishing a legal presence in the country through foreign direct investment. This involves incorporating a company in Nepal with foreign shareholding. The property ownership would be in the name of this Nepal-registered entity, not the foreign parent company directly.

However, foreign companies are restricted to purchasing only the amount of land necessary for their approved business operations. They cannot buy land for speculation or purposes unrelated to their core business activities. The land use must align with the approved investment proposal and business objectives.

Additionally, there are restrictions on purchasing land in certain sensitive or protected areas. Foreign-owned companies are generally not allowed to own land within 10 kilometers of Nepal’s international borders.

The process requires obtaining approval from the Department of Industry or Investment Board Nepal, depending on the size of the investment. For large-scale projects, approval from the Nepal Rastra Bank may also be needed for bringing in the investment funds.

Procedure of Buying Property as a Foreigner in Nepal

Step 1: Investment in Nepal through FDI Procedure
Step 2: Obtain Approval from DOI/IBN
Step 3: Approval from NRB (Nepal Rastra Bank) to inject Funds
Step 4: Incorporation of Company along with required Registrations
Step 5: Purchase of Land through the Foreign Company

Step 1: Investment in Nepal through FDI Procedure

The first step for a foreigner to purchase property in Nepal is to invest through the Foreign Direct Investment (FDI) procedure. This involves submitting an investment proposal to the Department of Industry (DOI) or Investment Board Nepal (IBN), depending on the size of the investment. The proposal should outline the business plan, including details on the proposed land acquisition. The minimum FDI threshold is NPR 50 million. The investor must demonstrate how the property will be used for the approved business activities. This step establishes the legal framework for the foreign investment and subsequent property purchase.

Step 2: Obtain Approval from DOI/IBN

After submitting the investment proposal, the next step is to obtain approval from either the Department of Industry or Investment Board Nepal. For investments up to NPR 6 billion, approval is granted by the DOI. Larger investments require approval from IBN. The authorities will review the proposal, including the justification for property acquisition. They assess whether the proposed land purchase aligns with the business objectives and complies with Nepal’s foreign investment policies. This approval is crucial as it allows the foreign investor to proceed with company registration and subsequent property purchase. The review process typically takes 15-30 days, depending on the complexity of the proposal.

Step 3: Approval from NRB (Nepal Rastra Bank) to inject Funds

Once the investment proposal is approved, the foreign investor must obtain approval from Nepal Rastra Bank (NRB), the central bank of Nepal, to bring investment funds into the country. This step is essential for ensuring compliance with Nepal’s foreign exchange regulations. The investor must submit an application to NRB detailing the amount of foreign currency to be brought in for the investment, including funds earmarked for property purchase. NRB verifies the source of funds and ensures that the investment complies with Nepal’s monetary policies. This approval is necessary to legally transfer the required funds into Nepal for the investment and property purchase.

Step 4: Incorporation of Company along with required Registrations

After obtaining necessary approvals, the foreign investor must incorporate a company in Nepal. This involves registering the company with the Office of Company Registrar and obtaining a Permanent Account Number (PAN) from the Inland Revenue Department. The company must be registered as per the Companies Act of Nepal, with the foreign investment component clearly specified. Additional registrations may be required depending on the nature of the business, such as industry-specific licenses or environmental clearances. The company registration process typically takes 2-3 weeks. This Nepal-registered company will be the legal entity that purchases and owns the property.

Step 5: Purchase of Land through the Foreign Company

The final step is the actual purchase of the property through the newly incorporated company. The company must identify suitable land aligned with its approved business plan. The land purchase process involves due diligence, including verifying the property’s ownership and ensuring it’s free from encumbrances. The company then negotiates with the landowner and executes a sale deed. The property transfer must be registered with the local Land Revenue Office. It’s important to note that the property will be registered in the name of the Nepal-registered company, not the foreign individual or parent company. The land use must strictly adhere to the approved business purposes as outlined in the investment proposal.

Can Nepali purchase property outside Nepal?

Currently, Nepalis are not generally permitted to purchase property outside Nepal using income earned within the country. The Foreign Exchange Regulation Act of Nepal places strict controls on the outflow of foreign currency, which effectively prevents most Nepalis from investing in foreign real estate.

However, there is a narrow exception. Nepalis who have earned income outside of Nepal may be able to purchase property in foreign countries using those offshore earnings. This typically applies to Non-Resident Nepalis (NRNs) who work abroad or have businesses outside Nepal.

It’s important to note that any income earned within Nepal cannot be used for foreign property investment. The Nepal Rastra Bank, which regulates foreign exchange transactions, does not allow the conversion of Nepali rupees into foreign currency for the purpose of purchasing property abroad.

This restriction is part of Nepal’s broader policy to control foreign exchange reserves and prevent capital flight. While there have been discussions about potentially relaxing these rules in the future, as of now, the purchase of foreign property by Nepali citizens using domestic income is not practiced or permitted under current regulations.

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Who can Purchase Land in Nepal?

In Nepal, land ownership is primarily restricted to Nepali citizens and certain categories of legal entities registered in Nepal. The main groups who can purchase land in Nepal are:

Nepali Citizens: Any Nepali citizen of legal age can purchase, own, and sell land in Nepal. This includes both resident and non-resident Nepali citizens. They have full rights to own both agricultural and non-agricultural land, subject to certain land ceiling limits.
Companies or other Legal Persons: Companies, cooperatives, and other legal entities registered in Nepal can purchase land for their business operations. This includes companies with foreign investment, provided they follow the approved FDI process. However, these entities are generally restricted to purchasing only the land necessary for their approved business activities.
Non-Resident Nepali (NRNs) with Citizenship or ID-Card: Non-Resident Nepalis who hold Nepali citizenship or have obtained an NRN card can purchase land in Nepal. They have similar land ownership rights as resident Nepali citizens, although there may be some additional documentation requirements.

Conclusion

Nepal’s property laws for foreigners are designed to protect national interests while allowing for strategic foreign investment. While direct property ownership by foreigners is restricted, the framework allows for property acquisition through properly registered companies for approved business purposes. For Nepali citizens, while domestic property ownership is straightforward.

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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.

Nepali Property Law for Foreigners