The resilient real estate market in Sri Lanka

In the current turbulent economic climate, it is natural for investors to wonder whether Sri Lanka’s real-estate market is a viable investment opportunity. 

As the dollar appreciates and the rupee is facing a challenging time, prudent investments in residential condominiums are still among the best options among all available alternatives.

This is true as the share market is also experiencing a volatile situation with trading being halted to keep the market steady.

In addition, rising inflation which reduces the attractiveness of liquid assets is converging with longstanding growth drivers such as increasing urbanization to drive growth.

As investors remain cautious with protesters at Galle Face asking the incumbent president to go home, issues such as challenges in obtaining raw materials for construction, could further exacerbate such pressure.

However, Sri Lanka’s overall real estate market has previously bounced back from many downturns. 

This holds true even at present, considering that the Land Value Indicator (LVI) for the Colombo District appreciated by 9.5% in the first half of 2021(as calculated by the Central Bank), compared with the year before. 

Historically, investing in real estate in the Serendib Island has provided a hedge against inflation, especially as investments in monetary assets become less enticing since they hold no intrinsic value, unlike real estate. 

Falling bank interest rates on FDs has further made investing in real estate more lucrative and relatively safe,

Condominiums are perhaps even more attractive in 2022 as the cost of a bag of cement can rise sharply without prior warning.

Therefore, building a house of your own becomes increasingly less affordable. 

In addition, the package of city life conveniences offered by condominiums such as security, maintenance/repairs and cleaning has perhaps increased further, due to ongoing power cuts prompted by the dollar shortage.

Growing urbanisation also remains a key consideration, in terms of which Sri Lanka is still catching up to its peers according to the 2018 edition of the United Nations’ World Urbanisation Prospects.

However, the good news is that the situation is changing and UN Habitat has indicated that the financial capital of the island Colombo is urbanising rapidly, with urbanisation levels growing by nearly 10% for the past 15 years.

This will undoubtedly fuel the growth of the real estate market, particularly for residential condominiums, with vertical living dominating the future of urban living, owing to space constraints and high land prices.

Leave a Comment

Your email address will not be published. Required fields are marked *