Government Plans to Ease Suspension of Land Fragmentation

The government is preparing to ease the ongoing suspension on land fragmentation and sub-division in municipalities that have yet to complete mandatory land classification, aiming to revive stalled real estate transactions and development projects.

The Ministry of Land Management, Cooperatives, and Poverty Alleviation halted the division and registration of land plots from July 17, 2025—the start of the current fiscal year 2025/26—in local units that failed to categorize land as required by the Land Use Regulation, 2022. The regulation obliges municipalities to classify all land into ten functional types—such as agricultural, residential, commercial, industrial, mining, forest, river and wetland, public use, cultural and archaeological, and other government-designated areas—before permitting further subdivision or related transactions.

Land Management Minister Anil Kumar Sinha, who assumed office on Tuesday, said the ministry has proposed amending the regulation to allow municipalities more time to finish classification while gradually resuming land-related services.

“Once the amendment is approved, ownership transfer, boundary demarcation, measurement, and approvals for development projects will be reinstated in non-compliant municipalities,” said Under Secretary Ganesh Prasad Bhatta.

The suspension has slowed property dealings. Real estate businesses report that transactions have dropped about 40 percent compared with May-June, while developers argue the policy conflicts with Nepal Rastra Bank’s recent measures to stimulate housing credit. The central bank’s latest monetary policy raised the credit ceiling for private residential construction or purchase to Rs 30 million from Rs 20 million and permits loan-to-value ratios of up to 80 percent for first-time homebuyers and 70 percent for others.

Municipalities were originally required to complete land classification within six months after the introduction of the regulation in August 2022, but deadlines were repeatedly extended, most recently to mid-July 2025. According to ministry data, only about 300 of Nepal’s 753 local governments have finished classification, around 153 are in the final stages, and roughly 300 have yet to begin.

Officials cite technical constraints, resource shortages, and local resistance as key obstacles. In some areas, residents oppose certain designations, while others fear that labeling land as agricultural or other lower-value categories could reduce opportunities for future residential sales.

Bhatta said the proposed amendment would give municipalities a final one-year extension to comply with the land classification.