Daily Mirror (Sri Lanka)

Building case for aggressive investment in SL’S iconic real-estate sector


Having gathered extensive expertise designing and executing internatio­nally renowned realestate projects across Asia and the Middle-east, experience teaches that the truth on the ground can often get distorted when viewed through the kaleidosco­pic lenses of political, economic and social commentary that often surrounds a market in transition.

In order to stay grounded, and objective about any investment opportunit­y, it is therefore vital to first get the rubber to the road and take in firsthand developmen­ts, past and on-going, in order to understand the potential of what is to come.

Particular­ly to the well travelled eye, a drive around the city reveals much about its character, its people, and its ability to drive progress. Colombo is a truly one of South Asia’s most unique cites and we remain confident that this vibrant metropolis will continue to thrive and prosper, particular­ly over the medium-long term.

All across the city, and its bustling suburbs, the signs of growth are abundant for all to see and while there are some considerab­le challenges to growth particular­ly when analyzed on a monthto-month, quarter-to-quarter or even on an annual basis. However, if the frame of reference is expanded, there is an underlying momentum to Sri Lanka’s developmen­t that can no longer be denied, and any prudent investor would do well to consider the fundamenta­l strengths and attraction­s that Sri Lanka holds as a place to visit and explore, to transact, invest and do business, and as a beautiful and safe place to call home.

On the global stage, Sri Lanka’s internatio­nal profile is on the rise. The unpreceden­ted boom in the tourist sector is in many ways a short-term indicator of the country’s long term potential. At present Sri Lanka is ranked number 110 on the World Bank’s Ease of Doing Business Rankings, however in several crucial areas, the country has made or maintained progress most notably, in terms of how easy it is to start up a business.

Such improvemen­ts are timely when considerin­g that Sri Lanka is being perceived as an island of opportunit­y, with an increasing­ly large footprint of multinatio­nal companies that rose from 275 to 301 between 2014 and 2015. Meanwhile, Colombo office markets, which comprises of nearly one million square feet of ‘Grade A’ stock are in higher demand with average occupancy rates as high as 95 percent. Such density of occupation only highlights the massive pent up demand that is building in Sri Lanka and this is due to the fact that new business opportunit­ies are opening up and many of them will open up unpreceden­ted new paradigms of social and economic developmen­t.

Already, we see notable upward trends in Gross Domestic Product (GDP) growth, which stood at 4.4 percent at the end of 2016, but has projected an edge up to 5 percent in 2017 while per capita income stands at US$3,900; another clear indicator of rising prosperity. As more opportunit­ies open up for better jobs in Colombo, conditions in the city will become more congested. With the average commute for an office goer in Colombo already rising to over 1.5 hours during peak hours, it is clear that a change is required.

Across large cities in India, like Mumbai, a significan­t percentage of the population that works in the city does not live inside it. Colombo has the opportunit­y to mitigate that situation by actively seeking to develop housing options for profession­als and working people. By minimizing the distance that they have to travel, Colombo can facilitate a more optimized configurat­ion for further developmen­t, in line with the extensive plans of the Government to develop a Colombo Megapolis Project, Port City Project, and Colombo Internatio­nal Financial City. All of these developmen­ts will necessitat­e a transition towards affordable, high-quality vertical living.

However, at present there is already a serious shortage of good quality housing in the city, particular­ly within the Rs.20-35 million range. Colombo has one of the lowest urban densities and most difficult commuting challenges of any major south Asian city. Thus, Colombo has no option but to go vertical in order to address these and catch up with the rest of South Asia. In that context, housing also remains the best and safest investment for surplus wealth within Sri Lanka, with maximum potential for growth in suburbs like Rajagiriya.

Particular­ly as a result of revisions to Government policy over the past year, including the removal of tax concession­s for real-estate developmen­t, newer entrants into the apartment developmen­t industry will find it difficult to compete with establishe­d players who were able to open properties in the recent past. In that regard, we anticipate an impending contractio­n in supply and an increase in demand, meaning that the market’s best window for investment into the real-estate sector would be over the next three year horizon. (The writer, Rohan Parikh is the Managing Director of Iconic Developmen­ts (Pvt.) Ltd.)

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