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Monday, September 24, 2012 - 10.03 GMT
Sri Lanka’s housing market remains healthy
-International Business Times


Sri Lanka's house price rises continue, as security issues get sorted out. Developers and homebuyers confirm there have been double-digit property price rises, states the International Business Times magazine today (24) in its reporting on Sri Lanka.

The Valuation Department's Former Chief Valuer, W. Seniviratne has said that the noteworthy upward trend in 2010 and after was made possible not only due to restored peace, but by government policies to attract investors, which had a huge impact in the tourism sector, transforming the leisure property sector.

Residential land prices started to increase in June 2009, after a sharp decline which reached its peak in 2007, according to Central Bank. Robust remittances in 2011 pushed up the Land Price Indices. Areas outside Colombo municipality may have had sharper price increases, but price levels still remain lower than in Colombo.

Demand for housing, however, remains strong with the help of the emerging IT-BPO and tourism industries. Residential properties in the Greater Colombo area, as well as its adjacent suburbs have been a hit for IT-BPO employees amounting to 63,000 Sri Lankans. Meanwhile, demand, especially for leisure properties, is high with tourist arrivals increasing by 7.8% to 90,338 tourists during the year to July 2012, the magazine further said.

In July 2012:

o The average sale price of houses in Sri Lanka was LKR 17.63 million (US$ 133,831), according to Lanka Property Web, one of the country's leading property portals.

o The average price of apartments was LKR 25.36 million (US$ 192,511).

o The average price of land was US$213 per sq. m. or LKR 710,000 (US$ 5,390) per perch in July 2012 (1 perch = 25.29 sq. m.).











42.48 million


3.84 million


Western Province (apart from Colombo)

16.34 million




Southern Province

13..80 million




Central Province

18.32 million




North West Province

15.6 million




North Central Province





Uva Province

8.07 million




Sabaragamuwa Province

10.31 million




Eastern Province

11.45 million




North Province

11.14 million




Source: Lanka Property Web

Peace after a 3-decade war

Confidence in the economy revived, and there was strong demand for luxury apartments from expatriates who had left during the intense fighting. Developers experienced lucrative profit margins. Local investors followed, as these properties earned high yields, International Business Times added.

Rapid economic growth

GDP growth of no less than 7.2% is projected for 2012 by the CB, which is a slight slowdown from the previous year's 8.2% growth.

Still, with the recent improvements in sectors like finance, service and tourism, as well as the IT/ITES-BPO industry boom in Colombo, demand for residential houses remains healthy.

Housing approvals in Colombo rose in 2010 by 21.9% to 9,614 units, after a major dip of 28.1% in 2009. Approvals were up by another 11% to 10,669 units in 2011. Around 76% of Sri Lanka's housing stock is owner-occupied.

To aid Sri Lanka in reducing its housing shortage, the Asian Development Bank (ADB) approved last August a US$ 15 million loan to DFCC Vardhana Bank (DVB).

The fund is available for relend to Sri Lankans, especially those living in tsunami-hit and post-conflict areas, for house purchase or rehabilitation.

Tight mortgage market

The Bank of Ceylon, Sri Lanka's largest bank, had housing loan interest rates of around 13.5% to 15.5% in August 2012. Rates were raised last April from 11% to 12%.

During the same period, the CBSL's repo and reverse repo rate remained unchanged at 7.75% and 9.75%, respectively.

Sri Lanka has a very small mortgage market, which amounted to LKR 159 billion or around 2.4% of GDP in 2011. Private commercial banks, which control about 75% of the market, offer adjustable-rate mortgage loans. State-owned banks offer only fixed-rate mortgage loans.

Mortgage loan maturities range from 15 to 25 years. The average commercial bank loan is LKR1 million (US$8,987); state-owned company loans are on average smaller.

Tourism is booming!

Since the 30-year war ended in 2009, tourist arrivals have gone up steadily - up 46% in 2010, and up 31% in 2011, to 855,975. To help boost tourism, the government has legalized gambling despite religious protests.

Sri Lanka used a global communication campaign "Visit Sri Lanka 2011" to promote the country as a peaceful destination. Sri Lanka also co-hosted the Cricket World Cup from February to April 2011. The tourism department aims to achieve at least 2.6 million tourists a year by 2016.

Tourist arrivals rose 7.8% during the year to July 2012. Business Monitor International (BMI) forecasts that tourist arrivals will rise another 55% to a total of 1.42 million tourists in 2016.

An IT-BPO industry is emerging

The growing Information Technology (IT) and the IT Enabled Services (ITES) industry in Sri Lanka has been one of the reasons that prompt an increase in demand for residential properties especially in the Greater Colombo area.

More of premium condominium developments are currently visible in the Central Business District, according to Jones Lang LaSalle. Meanwhile, middle-income buyers have lots of options, with villas, row houses and sub-divided developments emerging in the suburbs.

Sri Lanka has been one of the world's emerging IT-BPO destinations. It is among AT Kearney's Top 50 Global Outsourcing destinations, and Global Services Magazine's Top 20 Emerging Cities.

IT exports have risen from an estimated US$ 275 million in 2006, to around US$ 392 million in 2010.

The IT-BPO industry is aiming for US$ 1 billion in exports by 2015. Around 300 IT and BPO companies now operate in Sri Lanka. In 2011, around 63,000 Sri Lankans were employed in IT or BPO related jobs, almost double from 34,000 people employed in 2006, based on the latest ICT Workforce Survey. The industry's workforce is estimated to be growing by 20% annually, and it aims to increase direct employment to 100,000 in the next 5 years, according to AT Kearney.





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Last modified: September 24, 2012.

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