The government plans to build a new port city by reclaiming the seafront at a cost of $350 million and selling the land, Sri Lanka Port Authority said on Thursday.

The area will have eco-parks, residential areas, offices, and high-rise buildings.

"It is going to cost us about $350 million to fill it up," Nihal Keppetipola, Managing Director of Sri Lanka Ports Authority, told Reuters.

The filling would be funded by deposits on sales, he said.

"So we are not going to put up the capital investment. People, including foreigners, will put an advance and then purchase. We will use the money to fill," he said.

"We will be working on pricing. But we have to make sure that we earn very much more than $350 million," he said.

Already, the government has been creating new land about a kilometre away from the proposed area, as part of its expansion of the Colombo port.

South Korea's Hyundai Engineering and Construction Co is expected to complete a $300 million port expansion by April 2012 with a 6.8 km breakwater for three new container terminals.

Sri Lanka in August signed a $450 million deal with China Merchants Holdings and local conglomerate Aitken Spence to build the first of the three terminals.

Each terminal is expected to add the capability to handle 2.5 million TEUs more. The port now handles 4.5 million TEU.