Cargills Ceylon PLC has sold two plots of lands with an extent of little over two acres from its massive land bank held in Colombo and elsewhere to Vauxhall Land Developments Private Limited for a consideration of Rs.4.2 billion.
Cargills Ceylon PLC held two blocks of lands in the prime locations in Colombo 2—one stretching 1.5 acres in Vauxhall Street and 94 perches in Dawson street—under its fully owned subsidiary Dawson Office Complex Private Limited.
The land in Vauxhall Street has a market value of Rs.2.34 billion including two buildings in it, which have 21, 070 square feet area. The second land in Dawson Street has a valuation of Rs.800.3 million with a per perch value of Rs.8.5 million.
It appears that the sale has taken place with a massive capital gain because the carrying value of the two plots of lands is around Rs.3.14 billion.
It is not yet clear whether the sale has been in the making for sometime and the deal was struck to sell the two investment properties before the capital gains tax comes into effect from next April onwards.
According to the new Inland Revenue Act, the capital gains tax of 10 percent is applicable on the sale of investment assets but not capital assets.
Cargills Ceylon PLC one of the companies with an impressive land bank is carrying massive blocks of investment properties in its books with their values appreciating annually. Colombo land prices are irrationally high and have been appreciating stifling private investments.
The going rate of the Colombo’s land prices just before the end of the war was around Rs.4.0 million a perch.
The massive anomaly was said to have been created by the former regime when they allocated the land overlooking the Galle Face promenade to Shangri-La Hotel Colombo at double the market value and directing the then Chief Valuer to value every other land in Colombo at the same rate of the Shangri-La land.
As a result, Sri Lanka’s land prices have been appreciating 20 percent annually during the last 5 - years, crowding out the private sector investments and stifling economic value creation.
The government is also sitting on some invaluable plots of lands without earning a cent but incurring carrying values going up to millions.