About 17 percent of the total land area of Nepal is agricultural land; however, there is great regional variation in its distribution. The Tarai covers only 17%of total land area but comprises 49 percent of total agricultural land. The Hills and Mountains account for 40 percent and 11 percent of agricultural land each. Two thirds of Nepalese depend on agriculture for their livelihood; for these people, land is crucial for access to food, shelter and income. Nearly three and a half million rural people are considered to be food insecure. Some 1.3 million households are landless or land-poor. Geographically, the landless and land-poor are found all across Nepal.

Ownership of agricultural holdings is highly skewed. The top seven percent of households own about 31 percent of agricultural land whereas the bottom 20 percent own about three percent.

Landownership is generally inversely related to poverty and hunger in rural areas. Access to land is essential for the food and nutritional security of a household. From 1996 to 2004, poverty declined at a greater rate with increasing landholding (Figure 5.1). The poorest households in Nepal are those headed by agricultural labourers. The incidence of poverty in this group declined modestly between 1995 (47 percent) and 2004 (43 percent), whereas the national level was reduced from 42 percent to 31 percent over the same period. However, this decline is chiefly accounted for by those self-employed in agriculture (from 43 to 33 percent) as opposed to wage labourers in agriculture (56 to 54 percent), underscoring the importance of land ownership.

Figure 5.1: Poverty incidence and share of poor population by size of landholding, rural Nepal

Land distribution is unequal from the social and gender perspective as well. People from socially and economically disadvantaged groups, women, Dalits, indigenous communities and other vulnerable groups are the most affected by this inequality.

The landless are deprived of some fundamental rights including those to employment, social security, social justice and health. Landlessness itself has been identified as a factor contributing to the conflict and political instability. Land-related cases are typically the largest category of litigations filed in the courts of Nepal. For example, of 94,031 cases filed in 2008/09, 31 percent were land-related. The land reform provisions of the Comprehensive Peace Agreement and Interim Constitution have not yet been implemented in earnest because of a lack of political consensus and commitment.

A weak land administration system further contributes to ineffective implementation of redistribution provisions. The confluence of population growth, legal provisions on inheritance, existing traditions that rule the sharing of parental property and the lack of opportunities outside agriculture have contributed to lowering the size of operational holdings over subsequent generations, and to encroachment of land that is not suitable for cultivation. The latter has resulted in environmental degradation, conflict and localized natural disasters such as landslides.

The government is engaged in the issue of land reform in various ways, including through the constitution-drafting process and discussion of the place of socioeconomic rights in the constitution; through engagement with land rights groups; and through the formation of two key commissions dealing with the issues of land and landlessness.

The Lands Act 1964, which enacted vast, if not always beneficial, changes to the land tenure framework, has been amended 11 times (most recently in 2010) and remains the primary law governing land rights in Nepal today. The Comprehensive Peace Agreement and Interim Constitution refer to engaging in land reform and equitable redistribution. However, the issue of returning seized land and property remains sensitive.