As Sri Lanka sails forth towards unprecedented development, the real estate and construction sector has become significant as the back bone of the country’s economy.
As the sector continues to showcase phenomenal growth, speculations concerning an unstable future have been voiced by some. Sri Lanka’s real estate industry is driven forward by a set of expert players that place emphasis on innovation, strategy and sustainable growth. A quick look at the recent stats will prove this as the real-estate and construction sector have regained momentum with a substantial growth of 14.9 percent in 2016 from 2.7 percent reduction in 2015. Hence it’s important to delve deep and look at the fundamentals that are driving Sri Lanka’s real estate market before arriving at conclusions.
Having lived through Sri Lanka’s real estate boom right from the beginning, through the war years and the post-war boom, Blue Ocean Group ChairmanS.Thumilanshared some of his valuable insights on the fundamentally sound nature of the real estate boom in the country: “As a market leader, we are quite aware of the behavioural aspects of the market. In a recent speech, Prime Minister Ranil Wickremasinghe mentioned the scarcity of land in Colombo for real estate development. This statement alone is quite self-explanatory. There is a lack of supply, and demand has far outpaced supply. The market is catering to distinct segments based on the location and living ambiance. It’s safe to say that there is a supply shortage in all of these categories. However, it’s important to note that the real estate companies also need to ensure their core competencies to thrive in this environment.”
Thumilan points out that the supply in the luxury market segment needs to be viewed within the context of important factors such as the consistent flow of FDIs into the country, thanks to on-going socio-economic stability and economic growth. While the government is focused on developing the Western Province into a Megapolis by 2030, many expatriates who moved out during the war years are now slowly moving back to live out their retirement in their own country.
“We can clearly see that the purchase of condominiums in Sri Lanka by high net-worth expats has seen an exponential growth. It is a growing trend for citizens in countries such as China and the oil-rich Middle East and North Africa (MENA) to immigrate to other countries for a healthier and more convenient lifestyle. Therefore, a vast number of expats are looking to buy apartments for investment, holiday homes and accommodation purposes. Apartment pricing in Sri Lanka continues to be attractive in comparison to property prices in Europe, Hong Kong or China. Also, we cannot forget the vast potential Sri Lanka has to grow as a regional medical and educational hub.”
According to Thumilan, the ratio of condominium units to the population is well below the global average as Sri Lanka’s urbanisation rate is grossly lower than the global average and even than those of its peers. As published by World Bank in 2016, Sri-Lanka’s urbanization rate stood at 18.0 percent against the global urbanization rate of 50.0 percent; a fact that indicates tremendous room for growth.
“This is attested by the fact that we at Blue Ocean have, in the last three months alone, closed deals worth in excess of eight billion Rupees and expect many more deals to be closed within the next six months. We’re a 100 percent Sri Lankan owned company and the land on which our developments are built are all purchased by us outright, prior to commencement of the development, thus allowing us to ensure the highest quality of our end product,” says Thumilan.