The property market in the country is on an upward trend with the demand for land growing each year, and the growth cycle expected to hit a peak by 2020, urban planners say.
The market has been on a steady line of growth since the end of the conflict in 2009, and with the dawn of peace and stability, which are key factors for investment in housing and apartments .
According to Urban Development Authority (UDA) Chairman and National Physical Planning Department Director General, Dr. Jagath Munasinghe, the real estate market fluctuates, undergoing peaks and depressions.
When the demand rises and the supply has yet to meet the demand, prices go up. This marks the upgrading of the cycle. The prices reach a level affordable only to a certain class/income group of society. This is expected in an open market situation.
“However, when the supply is in excess and the market heats up, and also when the size of the affordable group goes down due to high pricing, the curve takes the downward trend. At present, we are experiencing the upward movement in the cycle and very likely, it will hit the peak by the 2020-2025 period,” Dr. Munasinghe said.
The present Urban Development Plan for Colombo was prepared in 2008. A development plan is updated every 10 years. The UDA will take into account this situation with the next update, which is due next year.
“The role of the State is to look into the needs of the lower middle income and lower income groups of society and assure that they are not deprived of opportunities to live in the city and its suburbs. That’s why the Urban Development Authority has initiated a few housing projects for middle income groups in the suburbs of Colombo. The Government has launched a program of housing for low income groups, as stated in the Budget Speech, 2017,” Dr. Munasinghe said.
With regard to the number of condominiums under construction in Colombo, he said, around 150 projects are under implementation and are pending approval, for development within the city. There will be over 20,000 new housing units added to the market by 2020.
This development could be seen in the immediate suburbs, such as, Kotte, Dehiwala, Mount Lavinia, Wattala and Kolonnawa.
“We do not have an account of the number of new units that have been completed during the past two years. However, we have estimated that around 3,000-3,500 housing units have been put up by the private sector during this period,” Dr. Munasinghe said.
The UDA has re-housed 5,000 families in under-served settlements in Colombo, from 2014-2016.
When the demand for housing increases, the need for utilities such as, water and electricity would rise.
“ However, considering the approaching demand, there are projects undertaken by the National Water Supply and Drainage Board and the Metro Colombo Urban Development Project (Under the Ministry of Megapolis and Western Development) to augment the existing water supply and drainage facilities within the city and in the suburbs, in order to meet the rising demand,” Dr. Munasinghe said.
Condominium Developers’ Association of Sri Lanka (CDASL) Secretary Anojan Selvanathan said, there are currently around 8,000 apartments being built in Colombo compared to less than 1,000 in 2008.
He said, there are investments in strategic development projects in the city, such as, the Shangri-la, Tata Housing and the Astoria, to name a few.
However, according to real estate experts, the growth momentum which had been high in the immediate post war years has not been seen in the subsequent years, due to policies that were not conducive for investments in the real estate sector.
Selvanathan said, unlike Singapore and Malaysia, Sri Lanka is not a high net worth investment destination. The lack of accommodative and flexible investment policies in the real estate sector for foreign investments have stifled the growth momentum to a certain extent.
“There are concessions for foreign investments in the real estate sector in the 2016 and 2017 budgets, but they need to be seen in reality,” Selvanathan said.
According to Lamudi Managing Director, Jafar Jafarov, the real estate market in Sri Lanka has been growing constantly over the past few years. We notice a positive trend on several aspects, specifically, investment apartments in the country, since there has been a growth in tourism and short term foreign employees. They search for fully furnished accommodation for short term stays, which can be a hassle in an emerging tourist destination such as, Sri Lanka. Thus, this category can be satisfied through investment apartments.
“Nevertheless, both, residential and commercial segments are growing rapidly. The mid-range apartments sector is on high demand, based on search requests made on Lamudi.lk over the past year. Similarly, the need for commercial space is on the rise, as well. Several start ups launching in Sri Lanka are looking for space in the commercial capital of the country, Colombo. The need for short term space which can be used to launch a product/service is on the rise because it reduces the monetary risk for start ups. Overall, the demand is on the growth stage now, showing signs of growth for the near future. However, it is necessary to note that projects that launch in the local market based on the demand side analysis would definitely succeed” Jafarov said.
Further, a report on the economy and the construction sector after the end of the conflict in 2009 by Lamudi states, the landscape in Colombo has been changing with the growth in tourism, infrastructural developments, domestic and international real estate projects.
“There is a strong correlation between urbanization and GDP per capita. Rapid urbanization continues to affect the Sri Lankan economy. Driven by economic growth and infrastructure development, Colombo has experienced urban migration. In recent years, skyscrapers have begun to dominate the city’s skyline, an attestation to the pulling power that the country is developing with domestic and international investors. This is expected to continue as infrastructure, transportation, and connectivity improve.The transformation over the years has caused an increase in luxury apartments, hotels and retail outlets. Though the key focus has been within the economic hub, Colombo, several residential and commercial projects have gradually begun targeting the suburbs and other districts. It shows that investors see the potential, not just of the largest city in the country, but in what Sri Lanka has to offer as a whole, especially, in terms of real estate and the property industry,” the report states.
