Purchasing an apartment is a decision that involves many factors and therefore buyers take a great deal of time and effort in researching many aspects and much detail before making a purchase decisions. In our research strategy, Focus Group Discussions (FGDs) play an important role in generating in-depth discussions that help to decipher the thought and considerations that go through the buyer’s minds. We have categorized the key buyer considerations under three main headings – Development image related, internal fittings and external amenities.
Where the image of the development is concerned, we can note that convenience, location, developer, proximity and price are the key factors evaluated by the prospective buyers. With reference to the building facilities, the leading considerations are swimming pool, gym, security, maintenance cost, parking and club-house facilities. The factors considered also include privacy view, ambiance availability of balconies and maid’s quarters, etc.
Most people have some knowledge or awareness of the main developers who have been active in high-end residential projects in Sri Lanka. A total of 16 developer names were mentioned during our FGDs by the prospective buyers. These names include Prime Lands (Pvt.) Ltd, Emperor Residencies, Blue Mountain Group, Iceland Residencies, Spathodea, Crescat Residencies Cinnamon, Skyline Residencies, E H Cooray & Sons Ltd, Suncity Developers, Trillium Residencies, Havelock City, The Monarch, Sanken Construction, Seagull, Queens Court and Ceylinco Homes International Limited. It is also clear that people do have some awareness on the developer credibility on the basis of available information.
Where unknown promoters were concerned, we found that most people were not comfortable to commit to such a project at the pre-sales stage. Most people would adopt a ‘wait and see’ policy.
The overwhelming response to questions on the reputation of the contractor was that buyers considered it as a vital facet of the development. Some consumers even expressed a preference for certain contractors and their willingness to pay extra in this regard.
Project delivery preference
The two to three-year range was the most popular time and expectation for project delivery, according to our research.
During the FGDs, the preferences for payment plans were discussed. In response to the question of whether the buyers would be happy to receive a discount in return for higher upfront payments, a mixed response was registered. The majority of people claimed that they would consider the options if the discount was significant. A 5 percent discount was not so popular and changes in bank interest rates were considered as having a potential influence on buyer decisions in this regard.
Working with brokers and agents
Presently, Sri Lanka does not have a formal system of registration or certification for real estate brokers and agents. This topic is one that is currently under discussion and debate and we expect some initiatives to be made from within the industry – sometime in the next few years. As a result of the unregulated environment, it is widely recommended that a great deal of care is exercised before a landowner enters into any agreement with an agent or with multiple agents. In the absence of agent certification, the land owner should check the agent’s credentials with the following measures:
- Verify their credentials by checking up on their online presence and track record.
- Conduct a formal interview with the agent and ask for references.
- Ensure that they have local expertise in the area of the property being considered.
- Establish clearly the commissions that are to be paid, in writing.
In the Sri Lankan context, landowners do work with multiple brokers but this approach can be problematic. Appointing a single entity/broker is advisable as the ideal broker for such properties will know where to pitch and whom to contact even without advertising. However, the landowners may be advised to place a time limit on the period of exclusivity. If the agent fails to deliver within that stipulated time, the owner can consider his options with more agents.
As a market that still lacks maturity, Sri Lankan brokers do not charge upfront fees from landowners and they also do not charge fees from the buyer, unlike in India for example. The standard commission payable by the sellers is 3 percent of the deal price in the case of residential properties. On occasion, if the price of the property is very high, the rate can be negotiated down to around two percent. However, some brokers also bargain for a higher price than the seller’s minimum price and ask the seller to pay the negotiated amount. At times this fee is higher than the brokerage.
The only additional charge that an agent may request for is to advertise the property in the national papers. This would be a matter for mutual consent and agreement between the seller and the agent.
(Real Estate Intelligence Unit (RIU), the pioneer in real estate research in Sri Lanka with decades of experience in expertise, provides unparalleled market updates, insights and analyses on the real estate market. The research and advisory arm of RIU is the knowledge and intelligence behind many of the new and upcoming developments in Sri Lanka)