Indians look at Sri Lanka to invest in vacation homes

Friday, 30 March 2012 00:01 - - {{hitsCtrl.values.hits}}

Economic Times (Bangalore): Sri Lanka’s property market is witnessing a strong revival following the end of the civil strife.

The Lankan Government has been clearing huge parcels of land in Colombo, Jaffna, Mullativu, Kilinochchi, Trincomalee, Hambantota, Galle, Kandy, Batticaloa and Hill Country regions like Nuwara Eliya for residential, hospitality and other commercial projects.

The country’s urban development authority, a single-window clearance agency, has been given a mandate to identify, clear and allocate land to investors.

“Our realty sector is seeing a lot of action in the last few months, with corporates and home buyers waiting for allotments. A large population of our own people staying in the US, Europe and Asia are investing in realty. Indian families too are investing,” said a senior official with the Commerce and Industries Ministry in Sri Lanka.

The Lankan Government has been urging its nationals to invest into the country’s real estate since the end of civil war. A Shankar, Senior Vice President in real estate consultancy Jones Lang LaSalle India, said there is a sudden spurt in demand for realty in Sri Lanka. “Many who stay outside are coming back,” he said.

Several Indian real estate developers are doing due-diligence and drawing up business plans for Sri Lanka. Colombo-based Indian businessman Somi Hazari of Shosova Group (formerly head of Indo-Lankan Chamber of Commerce and Industry), said, “A large number of Indians, businessmen and individuals, are finding Sri Lanka attractive for realty investment. Many Indian families have bought their second home or vacation home close to the beach or in the plantation areas in Lanka.”

Chennai-based Indian couple Ajith Kannan and Kruti Kannan has invested around Rs. 20 lakhs (Indian rupees) to buy a small home in the Hill Country. “Our family will holiday there for a month, and we will let it out during the rest of the year,” Ajith Kannan said.

A source in the Sri Lankan Deputy High Commission in Chennai said locals can buy land paying just the land price plus a very nominal registration fee, but foreigners need to pay stamp duty that’s 100% of the property value, which almost doubles the overall cost.

“Our Government is seriously debating this matter and is planning to introduce a sizeable relaxation to make Lanka even more attractive to foreign buyers. Already commercial projects worth $3 million and above are entitled to a five year tax holiday,” the official said.

Colombo city centre real estate is priced in the LKR (Lankan rupee) 20,000 to 25,000 per sft range (or between Indian Rs. 7,876 and 9,845). Beyond a 10 km radius, the prices are in the LKR 12,000 to 15,000/sft range (Indian Rs. 4,726 and 5,909).

These are very attractive rates compared to those in metros in India, but you need to consider the 100% stamp duty and the construction cost, which is almost 20% higher than in India as almost everything is imported. Land prices in Kandy are 25% cheaper than that in Colombo.