Patan Industrial Estate was formed in 1963 under the Company Act as with sponsorship from India. Patan Industrial Estate is part of a larger organization called Industrial Districts Management Limited, formerly known as ID that was established in 1960 with assistance from the United States. ID was formed "as a pioneer venture in the organized development of industrial districts (Ids) in Nepal" and "an undertaking of His Majesty's Government of Nepal." Industries that could either not acquire or not afford land and facilities elsewhere have come to operate on Patan Industrial Estate's grounds. It now provides facilities at minimal costs to the one hundred five industries that are currently operating there. "We provide facilities strictly to organizations. We do not support individual workers," said President of Patan Industrial Estate, Narkanta Joshi. In accordance with IDM outlines, Patan Industrial Estate has several primary functions.

The first function is to provide infrastructure facilities like developed land, industrial sheds and warehouses, roads, drainage and culverts, electricity, and water to the industries on the estate. Patan Industrial Estate also rents land for $US 26 per year per company and charges two rupees per square feet of building space every month. It provides security and maintenance, and promotes the industries through marketing schemes. It offers reduced cost HMG water and charges a 5% service charge on electricity bills. One such development was the addition of showrooms to the estate through which local handicraft industries can display their products. It gives priority service to handicraft industries while also servicing industries such as textile, plastic, steel, and furnishing.

Patan Industrial Estate also functions to promote industries in the estate and undertake the overall management and supervision of the entire estate itself and to identify problems of industrial units set up on the estate and provides management consultants and extension services for the improvement of their operation and productivity. It used to provide product evaluation but no longer does, as the practice was not feasible. It also disseminates information on feasible projects and facilities available on the estate. "There is a lack of remaining space available for industries to presently expand on the estate," said Joshi, which accounts for the estate's major problem. The estate also studies the implications of government policies and makes recommendations to HMG for necessary alterations to develop a congenial industrial atmosphere. When industries experience financial difficulties the estate cannot provide support in this way aside from assisting in the acquisition of bank loans by making formal requests.

Tourists are invited to come to their onsite showrooms but recently they have been empty, as tourism has plummeted over the past year by 50 to 60% due to political instability. However, the estate does promote onsite industries when orders come in from abroad and in this sense can act as a third party between the industries and buyers. Orders have come in from Singapore contracting Purna Wood Carving for a Vishnu temple. England has also contracted Shakya Handicraft (specializing in metal idols) to be sent for stupas and Germany has also imported Steel Wood Industry for an international building exhibition, Expo 2000, from a private company in Patan whose owner, Amrit Shakya, has completed the work there.

Other districts and estates have been established in Balaju, Hetauda, Dharan, Nepalgunj, Pokhara, Butwal, Bhaktapur, Birendranagar, and Rajbiraj. As statistics from the Handicraft Association of Nepal show, general exportation is down by 64%. Today the ultimate goal for these estates to become independent from government funding is a continuing struggle.