So, you decide to buy a house but you have no idea what the process is like?
In this write up I will try to give you a brief overview of the terms that you will come across when you are buying a house in Kathmandu, Nepal. I will try to keep it as simple as possible. As usual, if you have any questions, please feel free to reach out. I will try to answer them to the best of my knowledge.
Brokers (दलाल)
When searching for a house to buy, you’ll likely need a broker since finding the right property can be a challenging task. I recommend contacting as many brokers as possible, as most don’t charge buyers for their services—they charge the seller instead. However, it’s important to clarify this with the broker before engaging their services. A great advantage of working with brokers is that they can guide you through the entire process, explaining how everything works. I was fortunate enough to find a helpful broker who assisted me throughout the process without charging me a single rupee. He even negotiated on my behalf with the sellers 😀. If you’d like his contact information, just let me know.
Speaking of negotiating, once you find a house you like and are ready to proceed with the purchase, BARGAIN HARD! If the seller asks for 3 crores, politely counter with a price around 2.50 or 2.60 crores. This gives you some wiggle room. I know it sounds like a big difference, but sellers typically keep a significant margin. Trust me, when you finally agree on a price, you’ll be glad you started low.
Once you’ve successfully negotiated, make sure you do your due diligence. This includes verifying ownership, determining whether the land is guthi or raikad, and understanding the land’s history. You can do this by obtaining a photocopy of the Lalpurja from the owner and visiting the Malpot office, where they’ll provide all necessary information. Additionally, ask for photocopies of the house’s design/maps and consult an engineer to ensure everything is in order. For newer houses built in Kathmandu, you’re generally safe, as construction is only approved after meeting certain criteria (Mapdanda - मापदण्ड).
Remember, there are three critical documents you’ll need to obtain for any house:
DPC Completion and Construction Completion Certificate (डीपीसी तल सम्म भवन निर्माण स्विक्रिति पत्र)
Construction Permission Certificate (निर्माण ईजाजत पत्र)
Construction Completion Certification (निर्माण सम्पन्न पत्र)
Now time to be familiar with some more terms:
Government malpot rate of land (सरकारी मूल्यांकन):
This is the minimum valuation of the land/house set by the government, and it’s often much lower than the actual market value. For example, if the purchase price is 3 crores, the government rate might be less than 70 lakhs. Sellers and buyers typically prefer to use this lower amount in official documents to save on taxes, as the tax on this lower amount is minimal. I’ll explain more about this in the sections on profit tax (लाव कर) and property buying tax (राजस्व).
Thaili rakam (थैली रकम):
This is the amount you show in the documents as the total purchase price, including the token amount. It’s the amount on which you’ll pay taxes to the government. This amount is agreed upon by both the buyer and the seller and can range between the government Malpot rate (सरकारी मूल्यांकन) and the actual purchase price. For instance, if the house costs 3 crores and the government rate is 70 lakhs, you could show 2 crores in the documents, reducing your tax burden. This is a common practice in Nepal.
In my case, I chose to pay taxes on the full amount, and I’d recommend you do the same. This way, you’ll have peace of mind and won’t need to worry about potential legal issues later. Imagine if, years down the line, someone claims the land as part of their inheritance (अंश). Legally, you’d only be entitled to the thaili rakam, not the full purchase price. So, it’s better to play it safe and pay taxes on the full amount.
Profit tax (लाव कर):
This tax is paid to the government at the Malpot office when selling a house, usually by the seller. Currently, the profit tax is 7%, but it’s only applied to the profit, not the total sale price. The higher the thaili rakam, the higher the tax. This is why sellers often prefer to show the government Malpot rate in the documents. However, in Nepal, things are rarely straightforward. Sometimes, sellers might ask buyers to pay the profit tax, so clarify this point before proceeding with the token amount (बैना).
Property buying tax (भवन खरिद राजस्व):
This tax is also paid at the Malpot office when buying a house, usually by the buyer. The tax rate varies depending on whose name the property is being transferred to — 2.5% for senior citizens, 5% for men and 3.75% for women. This is why many people buy property in their grandparents’ names for significant tax savings. Again, this tax is calculated based on the thaili rakam. If the thaili rakam is lower, the taxes are lower too. Please note that these taxes are lower for sub-metropolitan (उप-महानगरपालिका) cities, muncipalities (नगरपालिका) and rural muncipalities (गाउँपालिका) and only apply to Metropolitan cities (महानगरपालिका) like Kathmandu. The taxes are also tad bit lower if the buyer and the seller are relatives.
Before moving forward, I highly recommend watching this video: https://www.youtube.com/watch?v=PVSAyvvHpwk
Baina/Baina batta (बैना बट्टा) (Token amount)
Once you’re satisfied with the house, you can proceed with the baina, a token amount paid to the seller to show your commitment to buying the house. This amount is decided between you and the seller and must be clearly mentioned in a document. This document should be written on Nepali paper (नेपाली कागज) by a lawyer (लेखनदास) and signed by both parties. It’s also essential to have this document verified and signed at the ward office (वडा कार्यालय). This step is crucial, as it serves as proof that the token amount was paid and received, and can help resolve any legal disputes that may arise in the future. Additionally, the government of Nepal has made this verification process mandatory.
The baina document typically includes:
Details of the buyer and seller, including their parents’ and grandparents’ names, citizenship numbers, and current addresses.
The token amount paid to the seller.
The total purchase price of the house, including the token amount. For example, if you’re buying a house for 3 crores and have paid 10 lakhs as the token, the document will show 3 crores, and the remaining 2.90 crores will be paid later.
The seller’s agreement to sell the house exclusively to you.
The timeframe for completing the sale, usually 35 days, which can be extended if both parties agree.
The cheque number and bank name used for the token payment.
A clause stating that no further negotiations on the house price will be made.
A penalty clause for breaking the agreement, as per the law.
In some cases I have seen token amount (बैना) being returned if the buyer or seller changes his/her mind. However, I have never experienced this myself. Depending on how close you are with the seller, there may or may not be a legal dispute. So it is always better to be cautious and not to pay the baina amount unless you are 100% sure that you want to buy the house.
By the way, let me know if you are looking for a lawyer (लेखनदास). I can recommend you one. He is a nice guy and charges a very small reasonable amount. He helped me with the entire process and I’m incredibly thankful for his help.
Malpot (मालपोत)
Finally, the big day has arrived—the day you’ll officially become the owner of your new house, and the seller will receive the full payment.
You might be wondering how such a large payment is made. The answer is a Good For Payment cheque. This is a regular cheque with additional bank stamps, guaranteeing that you have the funds in your account. The bank freezes this amount, assuring the seller that the money is ready to be transferred to his account. With this guarantee, the seller can confidently transfer the house to your name at the Malpot office and cash the cheque. This method is the most common way to pay for a house, and I recommend getting this cheque a day before your Malpot visit for peace of mind since banks in Nepal can be unpredictable.
Please note that good for payment cheque can be used for any kind of transaction. It is not limited to house buying only.
Here are a few things to prepare before your Malpot office visit:
Source of Fund (आयो स्व्रोत): This document proves how you obtained the money to buy the house, whether from stocks, bank loans, salary, or remittance slips. If you borrowed the money from friends or family, you’ll need to get it verified at the ward office (वडा कार्यालय). This process is part of the Department of Money Laundering Investigation (सम्पत्ति शुद्धीकरण अनुसन्धान विभाग) to ensure the money wasn’t obtained illegally.
All Heirs/Claimants (हकवाला): Make sure all heirs/claimants are present at the Malpot office along with the seller. This ensures that the house is being sold with the consent of all heirs, preventing potential legal disputes in the future.
Baina Document: Bring the baina document with you for verification at the Malpot office. This document is crucial as proof that the token amount was paid and received.
Good For Payment Cheque: Bring the Good For Payment cheque to hand over to the seller at the Malpot office. Multiple cheques can be issued in different denominations, as long as they total the thaili rakam. If the actual amount is higher than the thaili rakam, the remaining amount can be paid separately as agreed with the seller.
Once all documents are signed, and your fingerprints are taken, you’ll receive a new Lalpurja with your name on it, usually within a few hours or by the next day.
Congratulations, you are now the owner of the house!