New Updates of Real Estate Transactions

Kathmandu. The government, which had openly promised to take Nepal off the Gross List of the Financial Action Task Force (FATF) within a year, has changed its mind.

In just a few days, the government reversed its decision by releasing the 'Directive on Prevention of Money Laundering and Terrorist Financing, 2082' on May 15.
This directive aims to make land transactions more transparent.

In the budget for the fiscal year 2082/83 BS, the government mentioned that Nepal would be taken off the grey list of countries considered risky for money laundering sooner than planned. Part 24 of the budget says, “It has become a key goal for the government to improve the economy's reputation by removing the country from the money laundering risk list earlier than expected. ”

Experts say the government has removed some rules from the 'Directive on Prevention of Money Laundering and Financing of Terrorist Activities, 2082', which may allow illegal money to become legal.

The government has taken away these points in the directive about real estate deals.

Clauses (d), (e), and (f) of Section 2 in the Directive on Prevention of Money Laundering and Financing of Terrorist Activities, 2082 BS have been removed.
Also, both parties need to fill the K.Y.C form when buying or selling real estate, and the Land Service Center has also removed the requirement to submit the KYC form.

Similarly, the government has changed Section 5 of the original directive from the Department of Land Management and Authorization.The original Section 5 has now been replaced with a new Section 5.Transactions must be done through the banking system: For real estate purchases and sales between Rs. 1 million and Rs. 5 million, proof of payment made through banking devices is required.

For real estate above Rs. 5 million, the buyer must deposit a good for payment cheque, bank guarantee, e-payment, or other payment instruments approved by Nepal Rastra Bank, or deposit cash into the seller's bank account. Both the buyer and seller must sign and submit a photocopy of these documents.

The government has removed points 6, 7, and 8 from the earlier guidelines.This means there's no longer a need to include bank details when dealing in real estate, no money has to be deposited via banking channels into the revenue account, and there's no requirement to disclose this on paper.Section 9 of the original directive has been updated.

The word ‘three crore’ has been replaced with ‘one crore’. This means that the details of the transaction should be sent to the Financial Information Unit: If a buyer or seller buys or sells real estate worth Rs. 10 million or more once in a day or repeatedly, the office must send the details to the Financial Information Unit of Nepal Rastra Bank.

The term ‘informative institution’ has been removed from section 10 of the original directive.It has also been removed from section 12.All the schedules from the original directive have been removed.
This repeal seems to have weakened the government's policy and original goals.

The FATF has placed Nepal on the grey list of countries involved in asset laundering.It has also given Nepal a one-year deadline to make necessary reforms. However, Nepal has warned that it may be blacklisted if it doesn't make real progress in preventing money laundering within that time.The FATF had stated that real estate transactions in Nepal are often used as a safe way to launder money and need to be fully reformed.However, the government has stopped the initiative to bring real estate transactions into the system as an alternative to converting black money into white money within 48 hours.

Due to the pressure from the Prime Minister’s Office, the Ministry of Land Management has changed its decision and no longer plans to connect real estate deals to the system.