Every 15 years the world population increases by one billion accounted mostly by Asia and Africa. This creates demand for many basic necessities including housing.
Sri Lanka is a safe country which maintains the rule of law. It has tremendous potential. However, it is necessary to put infrastructure in place. The development of airport and highways are important. It is also necessary to have more high-rise units so that people will travel less and traffic congestion will ease, Malaysian Property expert Michael Yam said, highlighting major emerging opportunities in Sri Lanka’s real estate said.
The future of Sri Lanka’s economic development could very likely be hinged on how domestic policies towards real estate evolve, particularly with respect to supporting the massive demand for vertical living in Colombo and its suburbs, he said.
Guest Speaker, CEO and Managing Director of Malaysia’s Impetus Alliance Advisors, Michael Yam highlighted lessons from the Malaysian development experience relevant to current challenges in Sri Lanka and called for urgent recalibration of policy to support the housing and property development industry while reiterating potential for focused property policies to enhance Sri Lanka’s regional economic status as some of the key insights which emerged out of a Breakfast Meeting jointly hosted by John Keells Properties and DFCC Bank in Colombo last week.
“While the rate at which real estate development takes place can be drastically altered by socio-economic volatility, the demand for housing is primarily driven by population growth and employment opportunities. In that regard, there are many lessons that can be drawn from the story of Malaysia’s development and adapted to help Sri Lanka overcome its present challenges,” Yam explained.
Currently ranked third out of 10 countries in the ASEAN region – which itself is the third fastest growing group of nations in the global economy, Malaysia’s current success at the macroeconomic level is directly traceable to policy reforms passed in the wake of the global financial crisis that sought to enhance financial system resilience by – among others – reclassifying real estate as a priority sector.
“This fundamental reclassification enabled the state to implement stable, property-friendly policies, improve access to finance, ensure the rule of law and enhance connectivity through substantial investments into public transportation. In cities like Kuala Lumpur, this framework enabled the decentralization of commercial and administrative complexes outside of the Central Business District. As a result, the load placed on public infrastructure is distributed more evenly, enabling the entire city to function more efficiently,” Yam explained.
He further noted that if Sri Lanka could follow in these footsteps – the country could well be poised to play a similar role to the SAARC region that Malaysia does for ASEAN.
“Over the past decade, Sri Lankan real estate has made some truly impressive advances – particularly in relation to the development of high-rise condominiums, branded residences, and commercial spaces. Meanwhile, there are some notable mixed used integrated developments in the pipeline and plans for greater connectivity in public transport. However, even major cities like Colombo have been slow to move towards transit oriented development and planned township development. These are areas which will have to be given careful consideration moving forward,” Yam said.
Among the most pressing challenges facing the country over the medium-term will be the dearth in affordable vertical living within the city and its suburbs.
John Keells Properties, Sector Head, Nayana Mawilmada said the country’s approval process is cumbersome. The construction cost is high. The high rise living will fundamentally transform the fabric of the city. The construction of high-rise buildings needs incredible discipline and deep pockets. The policy focus of the government should be to facilitate the trend of apartment living. It needs to look at property development status to drive the transformation.
“Vertical living and multi-family residential spaces will be absolutely fundamental to solving Sri Lanka’s future housing challenges. At present just over 90% of Sri Lankans live in single family detached housing, and over time, this is a dynamic which cannot be sustained within the city, leading to increasing volumes of new housing stock being shifted to the fringe of the city massive traffic congestion, and major distortions in real estate prices,” he said.
The construction of high-rise buildings requires approved condominium plan and this living pattern will be inevitable adaptation in future. There needs to be right policies to ensure proper and safe high-rise living and the government should focus gradually to meet the new housing demands through condominiums.
However, the challenge is balancing the facility with affordability. The port city will drive the rental demand and it will be a boon to the rental market, he said.
Illustrating the growing severity of these issues, he pointed to analysis carried out by John Keells Properties which found that average commuting times from major residential suburbs, during peak hours, had increased to almost two hours on average. Meanwhile, average vehicle speeds within Colombo have steadily plunged from 22 km/h in 2012 down to 8 km/h in 2018.
“Among the most urgent priorities will be to change the way we approach urban development. There needs to be a shift towards densification and mass transit, while the private sector needs to be stimulated with the right incentives to help fill the gap in middle-income housing.
This cannot be accomplished without transparent regulations that help stimulate development and lowering the cost of construction – which are presently among the highest in the entire region.
“Similarly, there needs to be a concerted effort on the part of policy makers and the private sector to help widen access to housing finance – such as through a reduction in interest rates and tax rebates for first-time home buyers. Such reforms will undoubtedly have a transformative impact on our society and our economy,” he said.