Like much of the global spread of gated communities and fortified enclaves, the emergence of Kathmandu's “housing” industry (housing colonies and apartment complexes) grew out of neoliberal reforms. The restructuring of Nepal's economy and government created the conditions for privatized housing infrastructure, management, and services to cater to elites dissatisfied with the post‐1991 processes of democratization and declining conditions in the city. However, while the decentralization of local governance and deregulation of the finance industry created the conditions for elites to desert the public city for private housing complexes, the contractual relations of privatization also sowed the seeds of discontent. Through an ethnographic account of a conflict between the residents of a housing colony and the company that built and managed it (at that time), this article demonstrates how Kathmandu elites have adjusted to the rearrangement of their relationship with the state from the patron/client arrangements of the Panchayat era (1962–1990) to the “consumer citizenship” (Fernandes 2006) of the post‐1991 era of liberalization and democratization. Expecting relations of dependence, the residents were ultimately alienated by the indifference of the company. They articulated critiques of the company through ethnically coded protests of its business practices and expressions of nostalgia for the paternalist patronage of the pre‐1991 non‐democratic state. Ultimately, the conflict exposed a contradictory wish of elites to benefit from the privatized benefits of neoliberalism alongside the social protections of an interventionist state.