Sharp potential in condo investment for Sri Lankan expats
Now more than ever, Sri Lankan expats overseas are eyeing real estate as an investment opportunity, according to real estate sector experts.
This has come to light with the depreciation of the Sri Lankan rupee and many expatriates are looking for apartments that are already built by a reputed company in Sri Lanka, Iconic Developments (Pvt.) Ltd officials said.
A recent report by KPMG said about 18 percent buying apartments are Sri Lankan expatriates and four percent are institutional investors.
“This figure has increased substantially with the rupee depreciation,” Iconic Developments (Pvt.) Ltd Managing Director Rohan Parikh said.
The average year-on-year depreciation of the rupee from January 1, 2015 to September 21, 2018 was 9.2 percent per year.
“This has positioned aspiring expat condo owners in a significantly better position to purchase apartments,” Parikh explained.
In the short span of 14 months since its launch, Iconic galaxy has captured the hearts and minds of investors and residents with more than half of its residences sold. Galaxy builds on Iconic’s success at 110 Parliament Road, with over 172 residences sold in two years, on time delivery and double-digit returns.
Parikh added that their landmark residences, set in the heart of rapidly growing Rajagiriya, overlooking the Royal Colombo Golf Club, offered a lifestyle and amenities of a calibre never seen before - including an entire two floors dedicated to entertainment and fitness, with facilities such as a gymnasium, swimming pool, spa, creche, sports areas and more.
“It’s mostly what those residing abroad have already experienced,” Rohan Parikh noted with Iconic Galaxy now poised to become a fitting sequel to the 110 Parliament Road story - one that will set a new standard in Rajagiriya.
“It’s now a good time that expat Sri Lankans should ideally purchase apartments in Colombo,” expressed Parikh.
The KPMG report says 61 percent of the buyers of luxury condominiums are local investors, while 17 percent are local endusers.
“During the past few months we noticed there was a major hike in the queries from locals residing abroad,” Parikh further noted.
It also says the moderation in inflation in the first quarter of 2018 and the favourable inflation outlook as well as the continued negative output gap, compelled the Central Bank to end its policy tightening bias and reduce the SLFR by 25 basis points on April 4, 2017.
As witnessed by this report, Sri Lanka’s core economic statistics stand favourable towards aspiring expat apartment buyers.
“The GDP has grown marginally in 2017 and is now at Rs.13.3 trillion while in 2016 it was Rs.11.9 trillion. The country’s growth rate is now 4.5 percent,” he said adding that with this backdrop, the country’s housing requirement is high.
“Around 100,000 housing units per year are needed to fill the housing gap,” Parikh revealed, noting that in this light the demand for apartments is increasing.
He said the government infra-structure drive - the light rail transit system from Kottawa, the expressways, highways and new roads - all combine to make an investment in an apartment attractive.
Investments in condominiums have generated historical returns at 17 percent return on interest,” he said. Apartment rentals yield five percent to nine percent annually.
“There is stable economic growth. GDP per capita in 2017 was US$ 4,065. The government targets a GDP per capita of US$ 5,075 by 2020, propelling the country’s status to an upper middle income economy,” Rohan said explaining the statistics adding that Colombo Megapolis Development Plan will boost the country’s economy further.
“The Port City will be a game-changer with improvement in internal and external connectivity Sri Lanka’s urbanisation growth will amplify from 0.3 percent to three to four percent in the next 15 years, to reach an urbanisation rate of 30 percent by 2030,” Parikh said.
He stated that Port City Development Project is a key focal point in the real estate landscape of the region.
“Regionally, Sri Lanka remains attractive as an emerging market, when considering the return on interest on real estate. The positive outlook for the global economy is an encouraging sign that the rewards will continue for some time to come.”
The country’s population is also expected to increase to 24 million from 21.4 million in 2017. “This is also expected to drive the population density in the Colombo District from 3,495 people per square-kilometre to 5,722 per square-kilometre, by 2030.”
Sri Lanka’s housing requirement is also expected to rise to six million from the current five million, due to population growth, urbanisation and income growth that is currently happening, he said.
“We also predict that 6,827 apartment units will be added to the Sri Lankan real estate market by 2020.”
He added that Sri Lankan government has a target of attracting more than four million tourists annually by 2020.
“As such, commercial properties focused on tourism as well as shortterm residential properties offered for rent can expect a significant demand in the next few years.”
According to the Real Estate Report published by KPMG in Sri Lanka, the country’s ultra-luxury apartments are currently valued around US$ 400-550 per square-foot, while the luxury apartments are priced at US$ 200-399 per squarefoot. The luxury apartments in the suburban areas are valued between US$ 120 and US$ 199 per square-foot. In this backdrop, buying an apartment is essentially a sound investment decision.
“Now our apartments are more valuable than ever,” Parikh summed up.