Apartments built sorely on taxes and bank interest, industry says

While there is a slowdown in the sale of real estate properties, developers are worried that apartments are built sorely on government taxes and bank interest. Further the depreciation of the Sri Lankan rupee has fuelled the costs of construction while on the other hand a shortage of skilled labour has become a major challenge in the industry.

Lanka Property Web last week organised the 4th Lanka Property Show at the Kingsbury Hotel in Colombo. A panel of property experts discussed on the theme ‘Real estate and market outlook for 2019’.

Prime Group Chairman, Brahmanage Premalal stressed, “The biggest challenge in property sales is how you deliver the product, managing the costs on top of the taxes and bank interest. Today’s apartment walls are built on taxes and bank interest.” The last two to three years the land prices have been rising drastically, he added.

Candor Group of Companies Group Director, Ravi Abeysuriya stated, high costs are one of the major issues and interest rates are going up. “Today foreign investors can’t invest in properties unless they have millions of rupees. They mainly look at the capital gain and the rental income. Depreciation of the rupee has also fueled construction costs.”

On the challenge of recruiting skilled labour in the construction sector, Capital Heights Director, Rajitha Jayasuriya said, “The workers we have in Sri Lanka are not skilled enough to meet the demands and deadlines of the project completion. You need to find the right people to meet the demand of the industry. Projects have also delayed due to a shortage of skilled labour.”

Mr. Premalal added, the Board of Investment approved companies can import skilled labour from overseas. “In Sri Lanka we have talented individuals but they are driving three wheelers. More than 12 per cent of the workforce is driving three wheelers,” he noted.

Capital Trust Chairman, Tushan Wickramasinghe mentioned that it is impossible to build individual houses for people in Colombo anymore. The country’s population has increased by 3.4 per cent per annum from 2012 to 2017. However less than 10,000 apartments were built during this period. Within the next five years 18,000 apartments are supposed to be built, but many of them will not be completed by 2020, he noted.

Speaking on the bubble in the property market Mr. Premalal elaborated, the bubble issue was brought up 2.5 years ago, but nothing has happened yet. Only the ultra-luxury segment of properties will face a bubble when there is cheap credit.