Image: Joshua P Jacks
In most countries money speaks. In Nepal it appears to grumble quietly in the prime minister’s ear. Barely a week after unveiling new rules to cleanse its murky property market, the Nepali government reversed them. The decision came not after a raucous parliamentary debate or public outcry but, as insiders allege, under pressure from the Prime Minister’s Office (PMO), reportedly lobbied by real-estate interests. The reversal scrapped requirements for Know Your Customer (KYC) forms, mandatory bank statements, among other basic due diligence mechanisms, in land transactions.
Those measures, limited though they were, might have helped Nepal extricate itself from the Financial Action Task Force’s (FATF) grey list. Rather the reform was killed in its cradle.
The decision is at once mundane and instructive. In late May the Department of Land Management and Archives issued a directive that was in line with global norms: buyers and sellers of land would have to provide bank statements; transactions above NPR 1m would need to be electronic; large deals would be flagged to the financial intelligence unit. This was neither radical nor burdensome: indeed, most of these rules were merely those that apply in functioning financial systems.
But on June 6th the department rescinded them. The excuse was that the directive had jumped the gun, bypassing necessary regulatory revisions. Observers suspect a less technical motive.
Nepal’s real estate sector, flush with cash and poorly regulated, has long served as a laundromat for illicit wealth. From smuggled gold to political kickbacks, land is the preferred medium of value storage for the corrupt and the well-connected. The new rules would have disrupted this by leaving a paper trail. Predictably, they met resistance.
Critics of the directive including land developers argued it would have disrupted property transactions and made life harder for ordinary buyers, especially in a largely cash-driven economy. Bishnu Prasad Ghimire of the Nepal Land and Housing Developers Federation fretted buyers using collateral would face difficulties. Others complained of red tape. Yet such objections seem curiously timed: few appeared until after the directive had been reversed.
The deeper issue is not regulatory overreach but regulatory fragility. The FATF has cited the country’s opaque property transactions as a big reason for placing it on the grey list. Far from over-regulation, the country suffers from an absence of effective rules, more so those that constrain politically connected actors. Land reform, like tax reform or civil service restructuring, is perennially discussed and perpetually deferred.
In this light the directive was a litmus test of the government’s appetite for structural reform. That appetite, it turns out, is thin. Rameshore Khanal, a former finance secretary, called the reversal a betrayal of the national interest. He is not wrong. Apart from FATF compliance, cleaner property transactions could boost investor confidence; widen the tax net; and tame the speculative bubbles that distort Nepali urban planning. But such gains are long-term and diffuse.
By contrast, the losses from inconveniencing property brokers are immediate and focused, precisely the kind of political calculus that disfavours reform. There are, to be fair, questions of design. A more careful rollout—with phased implementation, exemptions for rural deals, better digital infrastructure—might have dulled resistance. But poor execution is a flimsy excuse for abandoning an idea entirely. If governance were held hostage to perfect planning, the country would still be waiting for a land registry.
The episode lays bare a recurring pattern in Nepali policymaking: short-term expedience trumps long-term vision. When challenged to reform, the state prefers retreat. Political authority is asserted vigorously where it is unnecessary (banning TikTok, say) but abdicated when it threatens rent-seeking interests. Even as Nepal courts international development partners and touts digital governance, its reform commitments falter at the first hint of elite discomfort.
Nepal is hardly alone in this dilemma. Around the world real estate is a magnet for illicit finance and a battleground for anti-corruption efforts. But most governments at least pretend to fight the good fight. Nepal, by contrast, appears to have surrendered before the first blow was struck.
It is tempting to see the directive’s repeal as just another bureaucratic blip. It is not. It signals a broader unwillingness to modernise the state in substance. Until the state shows that it can stomach mild discomfort in service of long-term integrity, its reform agenda will remain stuck in the mud, perhaps on a dubious plot of farmland reclassified for housing with no paperwork in sight. ■
