HIGH DEMAND FOR CONDOMINIUMS
Despite some reports in the press heralding doom and gloom for the local property market, several condominium projects are doing business as usual and have registered no tangible drop in demand. Their positive sentiments are supported by none other than the Central Bank, which authenticates this in its latest Annual Report: “The demand for houses and urban infrastructure is expanding rapidly with population growth and urbanization.” The report goes on to say: “Private sector continued to play a vital role in the housing sector…Construction of condominium housing is the increasing trend, with corporate property development being encouraged with various direct and indirect fiscal incentives, mostly under BOI status, and the growing interest of expatriate Sri Lankans to invest in the real estate sector.”
The trend of condominium development in Sri Lanka’s property market has been given a boost by Ceylinco Consolidated one of Sri Lanka’s largest and most respected conglomerates, headed by Chairman Deshamanya Dr. Lalith Kotelawala, with some unique housing concepts.
Some recent analysts of the real estate market have predicted a downturn in the housing market in the country, which does not appear to be so, for the fundamental reason that they do not take into account the target groups for which these properties are being constructed. By using a ‘one-size-fits-all approach’, the analysts misinform readers and skew the reality of the state of affairs in the property market today. A recent article in an online business website stated that there are some 4,000 housing units lying vacant, without specifying their location, the developer, or the income group these were built for.
In fact, the Central Bank states that there is a “shortage of 350,000” housing units in the city.
It is important to recognize that more than 50% buyers of condominiums in Colombo are expatriate Sri Lankans, who would like to own a property they could call their own back home. The Sri Lankan Diaspora located in USA, UK, Australia, Canada and other European and Middle Eastern countries forms a sizeable focus group - and property developers on their own initiative are conducting direct marketing programmes while also conducting corporate road shows in those countries. The Central Bank, the Board of Investment and relevant ministry officials are striving to provide support and encouragement to developers to inject high standards and raise the profile of the housing market in the country.
Any Sri Lankan, whether residing in the island or abroad is familiar with the resilience the country has shown time and again despite political and economic turmoil. If anything, it is the property market that has effective “shock absorbers” to act as a hedge against inflation and other economic concerns.
Despite the ethnic conflict that has dogged the island for several decades resulting in economic ups and downs, the prices in the city’s housing market have appreciated steadily over the years and proved to be a lucrative investment.
Of course the reliability of the developer is a key factor that determines the success of the project. The developers credentials and past track records are of paramount importance and needs to be given due attention prior to making investments in the real estate market.
By investing in unique development projects being constructed by reputed entities such as Ceylinco group companies, the investor is guaranteed timely delivery, international quality homes, and a definite appreciation in property even before he has taken possession of the condominium. Statistics indicate that buyers of Ceylinco projects have reported a 26-30% increase in value annually. Further, at present the secondary market for apartments in particular are said to be having brisk sales reselling at more than 100% the original purchase price 3 – 4 years ago.
Considering the official 28% increase in construction costs per annum the world over, buyers who put off investing in a home in Sri Lanka because of a variety of eco-political reasons find themselves completely out priced by the market years down the line. The reality is that building homes is never going to get cheaper, even if the economy starts skyrocketing upwards. Not to mention the fact that land prices too have gone through the roof in residential areas in Colombo. More and more wise investors realize that buying a ready condominium in a premier residential area is much cheaper than just buying land in that vicinity, leave alone factoring in the cost of constructing a home. Rents have also been registering growth of 11% year on year, which is another encouraging factor that affects the buyer’s decision to invest in a high profile development in an excellent location, as it guarantees a return on investment.
Moreover, unique projects such as those developed by Ceylinco companies offer not just a home but a “lifestyle” – with an array of sports and recreation facilities and other utilities and conveniences at their fingertips, all within the confines of the condominium complex itself! In the race to simplify our lives, cut down commuting time to and from work/school and spend more time with loved ones, a conveniently located condominium offering recreation and comfort seems like an opportunity too good to be missed. Ceylinco’s projects offer hi-tech security equipment and trained security personnel to guarantee safety for its residents, another feature that is much appreciated by investors. It is after all a buyers’ market and buyers are savvy when it comes to recognizing which project will prove lucrative.
The fact that Ceylinco has brought in more than Rs. 2 billion in terms of valuable foreign exchange into the country on the strength of investments made by Sri Lankan expatriates in its projects goes on to prove the contribution the property development sector is making towards the country’s economy.
Needless to say with millions of Sri Lankan expats living overseas and wanting to make their way back home the future potential of the property development sector contributing to the Sri Lankan economy will be greater.
Unfortunately, banks are not extending the fullest support to the developers, contractors and the buyers in order to grow the housing market further. By easing lending rates and partnering developers in housing projects, financial institutions could play a significant role in adding value to the sector and economic growth itself.
By publishing reports that sensationalize issues to increase readership, the publications should realize that the economy of the country gets impacted negatively. Circulating such reports causes potential buyers to hold back from investing in good projects. If anything, a stronger sense of responsibility and national mindedness is the need of the hour in each and every citizen in Sri Lanka. A strong sense of unity and pride in the nation will propel the country forward as its own unique engine of growth.