Housing Update

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Rents: Revenues and rights?


From an annual collection of Rs 55 million as land and house tax in Kathmandu, the revenue drastically rose to Rs 74 million within three months since mid-July this year. A slight policy revision under the land and house tax, the rent tax being tied up with the land and house tax, resulted in the massive revenue collection.

“When people go to the ward offices to pay their land and house tax, they are required to fill a form regarding the presence of tenants in their property. And if they specify any, they have to pay the rent tax along with the land and house tax,” says Kedar Bahadur Adhikary, CEO at Kathmandu Metropolitan City (KMC).

Jagannath Mishra, president of Kathmandu District Chapter of Forum for Protection of Consumer Rights Nepal, says that 80% of the population in the capital is living in rented rooms and apartments. Growth in construction of houses in the capital, which are particularly designed to accommodate tenants, explains the heavy population of people living on rent.

But due to the lack of organized system of putting rent agreements on paper between the house owners and tenants, the owners not only can easily evade taxes but also exert their will and demands on tenants.

Rental apartment blocks at Shantinagar, Kathmandu. Shantinagar is considered one of the many areas in the Valley popular for the availability of rental space.

“There were cases of 200% increment in rent which is completely unfair,” says Mishra, emphasizing the trend of owners pricing their space as they wish.

Sharada Koirala, a resident of Lokanthali, faced problems when her landlord wanted to double the house rent without any prior notice.

“When we refused, the landlord started to misbehave with our family. They would get upset if we had any guests and would cut the water supply,” she says, “but we had to bear the landlord’s misbehavior because it’s very difficult to find a proper home within a certain budget in Kathmandu.”

But they were forced to leave the place when the landlord threatened to throw away their belongings if they didn’t leave willingly.

“The landlord’s attitude was awful. He looked down on us as if we were occupying the space for free and had been living there at his mercy,” says Koirala.

Her family had been living there for five years and she claims that she had friendly relationship with the landlord’s family. So when the landlord misbehaved with them, she says she was astounded.

According to Mishra, rent tax as tax deduction at source (TDS) is also discriminatory to tenants.

“Even if they are paying tax, it comes under the tenants’ responsibility to pay taxes and hand over the bill to the owners,” he says. He says that it should be the duty of the party who has the benefit of the income to perform such responsibilities.

He adds that many tenants are deprived of basic necessities even when they pay very high rent for the space they occupy. He says that the lack of written contract between lessors and lessees thwarts any attempt to solve the problems regarding tenant’s rights.

“But the main drawback here is the lack of law to follow these issues,” he says.

Though there are no clear provisions for tenants’ rights in the law, Mishra says that the issues of tenants are partially addressed by Consumer Protection Act 2054 BS.
“The rule which allows only up to 20% increment in the price is also relevant to land and house rents,” he says.

The Muluki Ain (Civil Code) of 2020 BS has also stated that a tenant has the right to occupy leased space up to five years. And if the owner needs the space for himself, he is required to inform the tenants 35 days prior.

But these laws are not practiced in the land nor are house owners regulated by the government. Mishra, on the other hand, strongly suggests that these laws need to be revised according to the present context.

“The government should provide with a code of conduct and a tentative pricing list for the houses according to the facilities available,” he says. Some of the house owners demand three months advance payment while others ask tenants to vacate the place within a week’s time.

Even in Koirala’s case, her family had paid a month’s advance but that did not keep the house owner from forcing them to leave his property.

“After the incident, I felt like forming a group and pressure the concerned authority to bring out specific rules for tenants and landowners,” says Koirala.

“It’s a common practice in the Valley to raise the rent every year,” says Sharad Shah, a software engineer who has been renting apartments in Kathmandu for the last five years. Shah’s house owner recently asked him Rs 1,000 extra for a two bedroom flat at Old Baneshwor where he has been living for a year.

“I’m not complaining about the raise, but my concern is that they turn deaf ears when I have issues about the basic facilities they promised,” he says.

Upto three families live in small buildings like these throughout the valley.

Though a certain price is quoted in the beginning, the expenses for renting a flat never comes under the specified budget, he says. Tenants also have to pay for electricity, water, garbage and cable, which generally don’t come under the space rent.

Mishra claims that though owners quote high prices for their space, when it comes to paying tax, the same amount is deduced to minimal.

Adhikary too agrees that there is no clear mechanism for monitoring such irregularities. “If all land and house owners are to regularly pay their taxes, the government revenue from the rent tax would exceed one hundred million Rupees,” he says.

“Without proper monitoring by the government, house owners are least concerned when it comes to paying taxes or considering tenant’s rights,” says Mishra.

Due to the high prices of apartments in the capital, many families are forced to squeeze in a single room. In such cases, when the number of tenants exceeds the capacity of a building, they are not only deprived of basic necessities but they are also living in dangerous situations.

“Many houses in Kathmandu have narrow stairs and single entrances. This is very dangerous if disaster strikes, considering the crowd of people living in it,” says Mishra.

Adhikary says that they are also working on banning the use of residential houses for official purposes. “It’s to minimize human casualty during natural disasters or any other emergency situations,” he says.

Though tenants are the source of revenue for the land and house owners, they don’t hesitate to treat them as unequal. The lack of proper provisions in law, on the other hand, has not only forced tenants to have no rights at all but the government is also losing a considerable amount of revenue every fiscal year.

Published on 2012-12-07 12:21:47