RIUNIT suburban real estate update: Rajagiriya

• Consolidating status as premium residential zone as well as investment corridor amid Colombo’s urban renaissance

A residential oasis

Rajagiriya, once a quiet Colombo suburb, was initially flagged in the RIUNIT Real Estate Market report in 2014 as having one of the highest growth potentials amongst all the suburbs in the Western Province. Since then, the area has consolidated its position as a high-growth real estate hub, leveraging its strategic urban proximity and infrastructure-driven transformation. During the last decade, 2,000 apartment units have been added to the Rajagiriya real estate market.

With average apartment prices reaching $ 183 per sq. ft. (Tier 2) and $ 123 per sq. ft. (Tier 3) by the fourth quarter of 2024, Rajagiriya outpaces other suburban markets like Dehiwala ($ 163 Tier 2, $ 114 Tier 3), reflecting its premium appeal. Absorption rates near saturation (97% Tier 2, 98% Tier 3) underscore demand fuelled by sound infrastructure and lush greenery and a generous spread of water bodies. With the expected positive outlook in Rajagiriya, developers are doubling-down, particularly on the luxury apartment segment, with supply surging 135% to 503 units in 2023, which is the highest since 2014. In contrast, Tier 3 supply increased slightly less, as rising construction costs and import tariffs stifled affordable housing. 

Post-crisis resilience and land price recovery

Rajagiriya’s real estate market, like many others, bore the brunt of Sri Lanka’s 2022 debt crisis, experiencing a sharp downturn amid economic instability. However, its remarkable recovery highlights renewed investor confidence and the area’s enduring appeal. While affordability fuelled a quicker rebound in suburban areas, Rajagiriya’s premium status and strategic location have driven a sharper resurgence.

In 2022, Rajagiriya’s bare land prices plunged 48.7%, due to the devaluation of the Sri Lankan Rupee, to $ 10,290 per perch (Q2 2022), but rebounded robustly to $ 16,458 per perch by Q4 2024, which signals positive growth for both local and foreign investors. Suburban bare land prices recovered faster ($ 8922 per perch by Q4 2024), prioritising affordability. Rajagiriya’s impressive 25% year-on-year (YoY) land price growth in 2024 has outpaced suburban areas, which saw more modest increases of 8-13%. This rapid appreciation has drawn the attention of risk-tolerant investors who are betting on the area’s long-term potential.

Future outlook

A high-profile mixed-development project currently under construction by a Hong Kong-based investor is expected to have significant impacts on Rajagiriya and its real estate market. Such mixed-use projects typically act as catalysts, elevating local infrastructure, increasing land values, and attracting affluent demographics. Historical RIUNIT data suggest that the presence of major mixed developments results in a marked appreciation of land values, often exceeding the average growth rates seen elsewhere in the region. Consequently, Rajagiriya’s limited availability of land parcels has already begun exerting considerable upward pressure on prices.

Moreover, these developments create a multiplier effect, boosting economic activity and significantly enhancing the suburb’s overall attractiveness as both a residential and commercial hub. 

The future also looks brighter than ever as the upcoming light rail transit (LRT) (Malabe-Pettah), and the elevated highway from the new Kelani bridge to Athurugiriya, will significantly reduce the commute time to the Colombo Business District (CBD). RIUNIT sources indicate that the elevated highway is expected to have an entry point closer to Buthgamuwa Road, Rajagiriya. Additionally, the LRT project offers an entry point behind the railway ground (Near Welikada Prison) in Colombo 10. 

Looking ahead, Sri Lanka’s residential real estate market is on a positive trajectory, and Rajagiriya plays a pivotal role in this expansion, fuelled by foreign investor interest (33% YoY growth in 2024). Tourism-driven rental demand (Airbnb) further bolsters Rajagiriya’s outlook.

Rajagiriya’s blend of luxury positioning, infrastructure momentum, and policy support cements its status as Colombo’s most lucrative investment corridor. For buyers, it offers upside potential in a supply-constrained market; for developers, a blueprint to balance premium returns with urban sustainability.