The public need to applaud the elucidation compiled by Ms. Kamanthi Wickramasinghe of the Daily Mirror in her article “Condominiums: The Next Big Worry.” The article synthesises the opinions of two leading lights of the legal profession namely Kirthimala Gunasekera and Ajithaa Edirimanne, educating us on the pitfalls that need to be circumvented when investing in the real estate market in Sri Lanka.
We are warned of the high probability that the much hyped vertical living spaces are being sold without approved plans and valid deeds (maybe sans quality standards as well). It is quite possible that we are being lured by promotional literature aimed to cover inner deficiencies and inadequacies. We are beckoned by the promise of ultimate grandeur to live in prestigious exclusivity where the norm is ‘ultra-superior urban style’; offering designer fittings, superior finishes and priceless comfort. No assurance is given on safe drinking water supply (how often are the sumps and overhead tanks cleaned?); are we releasing sewerage into the 100-year-old sewerage system in Colombo put in place by the British? How reliable are the in- built safeguards to face fire hazards? Should we take for granted the adequacy of engineering design parameters embodied? The recent fire in the London Tower gives credence to the question raised by Mrs. Gunasekera asking whether the fire brigade can reach the 30th floor; or even the 12th floor in Sri Lanka?
We are beckoned by the promise of ultimate grandeur to live in prestigious exclusivity where the norm is ‘ultra-superior urban style’
In her experience she has come across a large number of high rises constructed without approved plans and title deeds. The question arises whether the plans could have never been approved and the developer would not have been able to execute and pass real legal ownership to his clients. These are circumvention of the obligations related to the existing legal and statutory framework. How many such living spaces are being offered in the market? Were the engineering parameters compromised too? This could lead to dire consequences in the future. The Wellawatte incident is an eye-opener. In the next ten years, how many “no-document condos” would collapse? Both Kirthimala and Ajithaa confirm that “majority of developers refrain from following the required approval and registration procedure.” The legal experts point out the inadequacy of the legal framework to sufficiently protect the public.
Globally, the transparency of real estate is under intense scrutiny. There is widening recognition of the crucial role that a transparent real estate sector plays, not only as a facilitator of new investment and business activity but also, significantly, in community well-being and inclusiveness.
In the developed world as investments to the real estate sector grow, investors demand further improvements in transparency, even among the world’s most transparent real estate markets. There are mounting pressures in developed countries for greater real estate transparency and to intensify the fight against corruption. The global real estate industry is making steady advances by enacting new legislation to set higher ethical standards.
There is wide canvassing among the communities for improved security of property ownership, supported by functioning, clear and accessible land registry and processing systems. Safe housing and workplaces underpinned by robust legislation and consistent enforcement of standards are urgently required. In such a framework, only the public will be able to trust agents to act honestly and professionally. With strong regulatory oversight, professional bodies will be able to enforce codes of conduct and ensure fair play. While concrete steps towards greater real estate market transparency are being made in several ‘low transparency’ and ‘opaque’ countries, Sri Lanka is struggling with the complexities of implementing new regulatory structures.
As per UDA estimation, “somewhere around 2020 or 2022 the country will come to a peak for the real estate market bubble to burst”
With regard to real estate transparency, some 109 countries are classified as highly transparent, transparent, semi-transparent, low transparency and opaque. Sri Lanka is ranked as 69 in the index and falls under the low transparency category. Countries such as Vietnam, Morocco, Uruguay, Ukraine, Iran, Jordan, Pakistan and Myanmar are categorised as low transparent.
Among highly transparent countries are UK, Australia, USA, France, New Zealand, Germany and the Netherlands. Singapore, Sweden, Poland, Hong Kong, Norway and Japan are classified under transparent. In the opaque category which comes next to low transparent are countries such as Oman, Uganda, Tunisia, Ethiopia and Iraq. Mainly in the low transparent and opaque groups, regulatory reforms will be essential to safeguard the general public. Greater emphasis will need to be placed on regulatory enforcement, particularly in low transparent markets, where there is the greatest disconnect between regulations and actual enforcement.
As per UDA estimation, “somewhere around 2020 or 2022 the country will come to a peak for the real estate market bubble to burst” (however this is refuted by leading developers). Sri Lanka at the moment is experiencing an upward movement in development and the demand for apartments and condominium is high and the supply is increasing to cater to the demand. Have developers entered into the race to capture the market by rushing and pushing their products through the construction process, with scant regard to quality standards and the regulatory framework? In the process, are construction quality standards being compromised? Will many others like the Wellawatte product enter the market? How many amateur developers are entering and operating in Sri Lanka’s real estate market?
Sri Lanka is experiencing an upward movement in development and the demand for apartments and condominium is high
The Megapolis and Western Development Ministry is planning to transform the entire Western Province into a megapolis by ushering comprehensive development within the next five years, taking into account bio-geo-physical and socio-economic aspects. Under the circumstances, the ministry will be required to address effectively the regulatory, statutory and legal framework governing the development of the built environment.