Legal Update: 2 Bhadra 2083 (Tuesday)

Abstract

Nepal’s recent regulatory framework governing real estate transactions introduces an important distinction between the transaction-value threshold that triggers a licensing requirement and the transaction-capacity threshold used to determine the applicable licence fee. In particular, transactions exceeding NPR 3 crore at a time fall within the licensing regime in the designated metropolitan and sub-metropolitan areas, while the NPR 5 crore threshold determines the applicable licence-fee category.

This article explains when a licence is legally required, the significance of the NPR 3 crore threshold, how the NPR 5 crore fee threshold operates, and the key compliance considerations for real estate brokers, developers, firms, companies, and investors before undertaking or facilitating a covered transaction.

Introduction

You operate a property consultancy in Kathmandu and are negotiating a real estate transaction valued at NPR 3.5 crore. Your company is duly registered and holds an active PAN, and your client assumes that these registrations are sufficient to proceed with the transaction.

That assumption may be incorrect.

A recent notice issued by the Department of Land Management and Archives requires firms, companies, and institutions undertaking a single real estate transaction exceeding NPR 3 crore in a metropolitan or sub-metropolitan area to obtain the applicable licence before conducting such a transaction. The licensing process is subject to a prescribed application period and requires both online submission and physical submission of the required documents.

It is important to distinguish between two separate monetary thresholds. NPR 3 crore is the threshold that triggers the licensing requirement. NPR 5 crore is the boundary used to determine the licence fee after the requirement applies.

This article explains the distinction between the two thresholds, the applicable licensing and filing process, the requirements concerning re-application or renewal, and the practical compliance checks that businesses and investors should undertake before proceeding with a covered transaction. The discussion is intended for property brokers, developers, housing companies, real estate consultancies, and investors involved in real estate transactions within the scope of the applicable licensing requirements.

1. When Does the Licensing Requirement Apply?

The licensing requirement depends primarily on the value of the transaction and the location of the property, rather than simply on the name or stated business activity of the entity involved.

The current notice is issued with reference to Sections 26A and 26B of the Land Revenue Act, 2034. It applies to a firm, company, or institution conducting a single real estate transaction exceeding NPR 3 crore in a metropolitan or sub-metropolitan area. The relevant government notification has identified the applicable metropolitan and sub-metropolitan areas for this purpose.

Accordingly, NPR 3 crore is the threshold at which the licensing requirement becomes relevant under the notice. The requirement is not determined solely by whether an entity describes itself as a “broker” or “real estate agency”. The nature and substance of the activities undertaken by the entity are also relevant.

For example, a company operating as a property consultancy may identify prospective buyers, facilitate negotiations, coordinate transaction documents, and receive a success-based fee. If these activities are undertaken in connection with a single real estate transaction exceeding NPR 3 crore in a covered metropolitan or sub-metropolitan area, the company should assess whether it is required to obtain the prescribed licence.

The key compliance question is therefore not simply “What is the name of our business?” It is “What role does our firm, company, or institution perform in the relevant real estate transaction?”

Entities involved in qualifying transactions should determine their licensing obligations before proceeding with the transaction, rather than relying solely on their existing company registration, PAN, or business description.

2. Why NPR 5 Crore Is Not the Licensing Trigger?

NPR 5 crore is a licence-fee threshold, not the threshold that determines whether a licence is required.

Under Rule 23ट of the Land Revenue Regulations, 2036, the prescribed licence fee is NPR 5 lakh for a transaction of up to NPR 5 crore at a time. Where the transaction exceeds NPR 5 crore, the prescribed fee increases to NPR 10 lakh.

The practical distinction is important. A firm undertaking a single qualifying transaction of NPR 3.5 crore may already be required to obtain a licence, even though the transaction falls below the NPR 5 crore fee threshold. In that case, the lower licence-fee category would apply.

Similarly, a firm undertaking a single qualifying transaction of NPR 6 crore would be subject to the same licensing requirement, but the higher licence-fee category would apply.

For example, a broker should not assume that a licence becomes necessary only when a transaction reaches NPR 5 crore. An NPR 3.5 crore transaction in Kathmandu, Lalitpur, or another covered metropolitan or sub-metropolitan area may already fall within the licensing requirement.

Businesses should therefore distinguish clearly between the transaction threshold that triggers the licensing requirement and the transaction threshold that determines the applicable licence fee. They should also maintain accurate records of qualifying transactions and ensure that their licensing status and fee category correspond to the transactions they undertake.

This distinction may also be relevant when businesses undergo licence reapplication, banking due diligence, regulatory review, or investor due diligence.

3. What must be filed within the application window?

The licensing application process consists of two stages: online submission and subsequent physical submission of the application and supporting documents.

Under the Department’s notice, eligible applicants must submit their application through the prescribed online system within 21 days from the date of publication of the notice. After completing the online submission, the applicant must print a copy of the submitted application and physically submit it, together with the required supporting documents, to the Department. Accordingly, completion of the online application alone may not satisfy the filing requirements where physical submission is also prescribed.

The application must be prepared in the prescribed format under Schedule 8 of the Land Revenue Regulations, 2036, as amended by the Land Revenue (Eighth Amendment) Regulations, 2082.

Applicants should therefore prepare the application and supporting documents in advance and verify that all required information and documents are complete and consistent before submission. The application follows the format prescribed under Schedule 8 of the Land Revenue Regulations, 2036, as amended by the Land Revenue (Eighth Amendment) Regulations, 2082. The supporting file should be prepared carefully, rather than assembled at the last minute.

Key documents may include:

• Company registration certificate.
• Memorandum and Articles of Association.
• Shareholder or member records.
• PAN or VAT registration.
• Updated company records.
• Current tax clearance certificate.
• Business plan and financial projections.
• Board minute authorising the application.
• Company contact details and website information.
• Required police clearance certificates.

The police-clearance requirement is particularly important. The notice refers to certificates for directors or members from Nepal Police’s central criminal-records authority. This may require separate certificates for relevant individuals, rather than one certificate issued only in the company’s name.

4. Who must reapply, and what should investors verify?

Businesses that applied under an earlier notice should not assume that their previous application remains valid.

The current notice provides for re-application by firms or companies that applied under the earlier notice but had not obtained their licence by the end of Ashadh 2083. Such applicants may be required to submit a new application under the current procedure within the prescribed 21-day period.

For example, a company that previously submitted an application but has not yet received its licence should confirm its status with the Department. An earlier application, acknowledgement receipt, or online submission should not by itself be treated as proof that the company is licensed.

Before completing a high-value real estate transaction, investors, banks, and other counterparties should also verify the intermediary’s regulatory status. Where applicable, they should confirm:

• the intermediary’s licence number or reference;
• the type or scope of transaction covered by the licence;
• whether the licence is currently valid; and
• the intermediary’s role in the transaction and entitlement to receive any commission or fee.

These checks are separate from title, ownership, tax, and other legal due diligence. They are intended to confirm that the intermediary has the required authority to participate in the transaction.

Businesses planning to undertake or facilitate a qualifying transaction should promptly review the current notice, their application status, the transaction value, and the required supporting documents.

Verdict

NPR 3 crore is the first number to consider for licensing. If your firm, company, or institution conducts a single property transaction exceeding NPR 3 crore in a covered metropolitan or sub-metropolitan area, you should determine whether a licence is required before proceeding.

NPR 5 crore serves a different purpose. It determines the applicable licence-fee category once the licensing requirement applies. Therefore, treating NPR 5 crore as the licensing threshold could cause businesses handling transactions between NPR 3 crore and NPR 5 crore to overlook their compliance obligations.

Businesses should review their transaction records, business activities, previous applications, and supporting documents. If an earlier application was submitted but no licence was issued, confirm whether a fresh application is required under the current notice.

Samarthya Legal Concern can assist with licence classification, re-application, document preparation, intermediary agreements, and real estate regulatory compliance. Contact us at    +977 9846800455 or info@lawsamarthya.com for a confidential consultation.

Why This Matters?

This is not just about paying a government fee. A licensing issue can delay the transaction, affect bank reviews, make negotiations more difficult, and create uncertainty for both buyers and sellers.

The risk can be higher when a company works with informal agents, has unclear commission arrangements, or uses outdated application documents. For NRN and foreign-linked investors, it is also important to confirm that the intermediary is properly authorised and that the transaction records are clear.

The safest approach is to keep two questions separate: Does the transaction exceed NPR 3 crore? And, if so, which licence-fee category applies? Keeping this distinction clear can help businesses meet the applicable requirements and avoid compliance problems before closing the transaction.

For assistance, contact +977 980-2054433 or info@lawsamarthtya.com.