The business sector is preparing to appeal to the government to reconsider the new revised lease rates for State land that came into effect last month. 

On January 15, the Department of Land Administration and Management under the National Land Commission Secretariat (NLCS) notified the implementation of revised State land lease rates 2023. The revision comes after over 14 years, the last revision was in February 2009.

This revision rate will be applicable for all new leases. However, the old lease rates of 2009 may be applied for all existing leased land until the completion of a one-year cycle, not exceeding beyond December 31 this year. 

The notification from the NLCS stated that it was crucial to periodically revise lease rates to adapt to evolving economic conditions, promoting the effective utilisation of land, enhancing revenue generation, and discouraging underutilisation.

It added that various discrepancies were identified in the determination of lease rents, where rents showed no correlation with the land value, among other factors and the Section 309 of the Land Act of Bhutan 2007 mandates the revision of the land lease rates every five years. 

The revision was coordinated by the Property Value and Assessment Agency (PAVA) unit under the finance ministry with active collaboration from pertinent stakeholders, including the NLCS.

The revision comes with varying rates for urban land lease rates across 67 urban centers—highest rates for the four Thromdes (Thimphu, Phuentsholing, Gelephu, and Samdrupjongkhar).  

General Secretary of Association of Bhutanese Industries (ABI), Pema Namgyel Ghaley said that the manufacturing or production lease rent for Phuentsholing and Thimphu Thromdes saw a substantial increase of 366 percent and 521 percent respectively, from Nu 5 per sq. ft to Nu 23.23 sq. ft and from Nu 4 per sq.ft to Nu 24.87 per sq.ft. 

Suppose, for a standard factory leasing 1 acre of land in the Thromde area, there is an increase in the lease amount from Nu 1039, 771 from the earlier Nu 217,800 per annum. 

Pema Namgyel Ghaley said that the small and medium industries operating in these areas are already grappling with the aftermath of the Covid-19 pandemic and are diligently working to revitalise their businesses. 

For industrial parks land lease rates for Jemina Industrial Estate in Thimphu, Norbugang Industrial Park and Dhamdum Industrial Park in Samtse, Motanga Industrial Park in Samdrupjongkhar, the land lease rate is maintained at Nu 4 per sq.ft. However, for Pasakha Industrial Estate, the revised rate is discriminant set at Nu 10 per sq.ft, he added. 

All industrial parks lease rate shall be increased after every two years.

If a lessee has a trading business in Thimphu Thromde, he or she will be charged Nu 49.73 per square feet (sq. ft) from earlier Nu 20 per sq.ft. 

For a decimal of land leased, it comes to Nu 21, 662,39 annually from earlier Nu 8,712, an increase of 148.65 percent. 

The Association plans to appeal to the government to reconsider the revised land lease rates soon. 

“In light of the challenging economic situation, particularly the ongoing efforts of the private sector to recover from the impacts of the pandemic, we earnestly request the government to maintain the status quo of the lease rent,” Pema Namgyel Ghaley said.

He asked that a thorough review of the implementation of the Revised State Land Rates, 2023, with active consultation involving the private sector and relevant agencies has to be carried out to ensure a balanced perspective.

The ABI stated that the National Land Commission announced the implementation of the revised state land lease rates, 2023, assigning the coordination responsibility to the PAVA unit under the finance ministry. 

“This process involved collaboration with key stakeholders, including NLCS. However, it is regrettable that private sector representatives were neither engaged as stakeholders during the assessment nor consulted in the decision-making process,” Pema Namgyel Ghaley.

President of Association of Wood-based Industries, Phuntsho Wangdi, said that the revised land lease rate coming at the time when businesses are recovering from the economic downturn and facing difficulty is discouraging and disappointing for the private sector. 

“The government could have increased it proportionately based on the capacity of the business, otherwise, many businesses will shut down,” he said, adding that it could have aligned to the tenancy agreement where 10 percent increase if applied after every two years. 

On the other hand, President of the Automobile Sector Association of Bhutan, LB Gurung said that the automobile workshops in Thimphu, which are leased on private lands, have to pay high rent of Nu 100,000 to 150,000 monthly. 

The workshops in Phuentsholing, Gelephu and Samdrupjongkhar thromdes are on leased State land. With revision, a workshop owner has to pay Nu 23.27 per sq.ft which is Nu 10, 136.41 annually for a decimal of land or Nu 101, 364.12 annually for a 10 decimal land. 

For residential lease rate, which is for the living quarters area and shall include areas given for accommodation of construction workers and stores for building construction, it has been categorised into three—long-term (above three years), short-term (up to three years), and temporary (up to six months). 

Earlier the rate in Thimphu Thromde was uniform at Nu 5 per sq.ft, however, with the revision it is now Nu 18.49 per sq.ft for long term, 23.11 for short-term, and 28.89 for temporary.

For a 10 decimal of residential space, a lessee has to pay Nu 80, 542.44 annually for long-term, Nu 100,667.16 for short-term, and Nu 100,667.16 annually for temporary. 

An institutional related lease is categorised into social (areas occupied by civil society organisations, schools, hospital, religious bodies, rehabilitation centers, orphanages, etc) and non-social use (areas are occupied by government, corporate offices and utilities service structures example, substation/electric double poles/ fiber cabinet/ telecommunications).

For social, it ranges between Nu .06 and Nu 3.7 per sq.ft, and non-social between .12 and 7.4 per sq.ft respectively depending on the area.

Land lease rates for schools in Thimphu are to be maintained status quo with provisions for 10 percent increase every two years. 

At the same time, lease rate for sports facilities and recreational parks will be continued at a token fee of Nu .10 per sq.ft per annum as maintained earlier.

Other lease rates

For lease rates under tsamdro or pasture development, the rate was revised to Nu 120 per acre annually for individual lease and Nu 85 per acre annually for community lease. However, those domicile individuals or communities will get a 90 percent rebate. 

For sokshing, the rate is maintained at an earlier rate of Nu 10 per acre annually.

Those lease holders for mining activities will be charged Nu 2,800 per acre per annum from its earlier rate of Nu 640 per acre annually. 

Unlike the earlier rate of Nu 640 per acre annually for the commercial agriculture or livestock farm, the revised rate had different rates across 20 Dzongkhags. Highest was reported at Nu 3, 169.92 per acre annually for Thimphu and lowest at Nu 1, 313.06 per acre annually for Gasa. 

Land lease rate for business activities outside the industrial park was revised between Nu .72 per sq.ft in Thimphu and Nu .12 per sq.ft for Gasa.

State land lease rate for developmental activities by government and nonprofit Civil Society Organisations excluding government corporations has been revised from Nu 100 per acre annually of 2009 rate to highest at Nu 630.5 per acre annually in Thimphu and Nu 103.63 per acre annually, the lowest for Gasa.