KPMG Real Estate Report to attract more foreign investment

KPMG in Sri Lanka, last week launched its very first real estate report of Sri Lanka’s real estate industry, targeted towards foreign investors, called, ‘Paradise Island – Luxury Living in the tropics’.

Industry professionals gathered at the launch to discuss the current developments and trends in the Sri Lankan real estate industry, how it can improve moving forward, and the current developments in the Colombo Port City.

Paradise Island Real Estate Report overview

KPMG in Sri Lanka Principal Deal Advisory Shiluka Goonawardene speaking at the launch, shed light on the aim of publishing a real estate report on the Sri Lankan real estate market.

“This is the first real estate research report we have done on the topic of luxury real estate in Sri Lanka. It complements our historic expertise in the sector and highlights some of the key financial trends, challenges, and opportunities for the real estate industry in the country. KPMG in Sri Lanka has undertaken research into the real estate industry to identify opportunities and trends for investment and evaluated the implications of the new Inland Revenue Act and how it would benefit investors,” he said.

Goonawardene also pointed out some of the salient features of the publication, emphasising on the population boom, urbanisation growth, growth in the foreign direct investment (FDI) inflow, and the estimated gross domestic product (GDP).

“We expect Sri Lanka’s urbanisation growth to amplify from 0.3% to 3-4% in the next 15 years, to reach an urbanisation rate of 30% by 2030. The country’s population is also expected to increase to 24 million by 2030, 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. We also predict that 6,827 apartment units will be added to the Sri Lankan real estate market by 2020,” he elaborated.

According to the Sri Lanka Real Estate Report published by KPMG in Sri Lanka, the country’s ultra luxury apartments are currently valued around $400-550 per square foot, while the luxury apartments are priced at $200-399 per square foot. The luxury apartments in the suburban areas are valued at lower price points between $120 and $199 per square foot.

The report also mentions that, about 61% of the buyers of luxury condominiums are local investors, while 17% are local end-users, 18% are Sri Lankan expatriates, and 4% are institutional investors.

The Paradise Island report also includes more information for foreign and local investors on topics such as reasons to invest in Sri Lankan real estate, demographics of the Colombo District, prices of real estate in the country, Government policies for encouraging more investment in the real estate sector, and how KPMG can provide assistance when investing in the Sri Lankan real estate.

Attractiveness of Sri Lankan real estate market to foreign investors

Sri Lanka Sotheby’s International Reality Sales and Marketing Director Charles Phillpot also speaking at the event said that Sotherby’s International Reality has opened up in Sri Lanka, because it is an up and coming hotspot for real estate investment.

“Sotheby’s International Reality opened here because of one main reason. We think that it is the right time and the right place. When you look at Sri Lanka, there are a number of reasons to be here. One of the main reasons have been is that the Sri Lankan real estate market is coming of age. People who buy in real estate in Colombo today are mostly local investors. About 60-70% are local investors, but we also have non-Sri Lankan foreign investors investing in the real estate market too. We have buyers from Hong Kong, China, and even Western counties who are investing in the real estate market. We are also seeing that ex-pats who are living in the UAE, Singapore or Hong Kong, invest in real estate in Sri Lanka because it is easier for them when considering aspects such as the location of the country and flight time. The other reason is that people invest in Sri Lankan real estate because they can. In many countries it is really difficult for foreigners to invest and buy real estate. It is relatively easy to buy properties in Sri Lanka if you are a foreigner. Other issues such as climate, flora, and fauna are also involved in this conversation. Sri Lanka is very attractive if we take these aspects into consideration,” he elaborated.  He also touched on the attractiveness of the Sri Lankan real estate market and where it could improve in terms of attracting more foreign investors.

“The improving infrastructure in Sri Lanka is really attractive, although it can improve a bit more. There are also great new developments here too. When you go through the real estate report, you can also see the growth rate is quite extraordinary. If we talk about the reasons on why people would not invest in Sri Lanka, I can only think of two. First is the shifting sands in Government policy. If it could be stronger and more established, it would be better. Finally, the management and security of your assets. If you buy a property here, you have to be vigilant whether it is properly managed,” he concluded.

Colombo Port City developments

China Harbour Engineering Company (CHEC) Colombo Port City (CPC) Chief Sales and Marketing Officer Liang Thow Ming shed light on the recent developments regarding the CPC and their future plans for the port city.

“We are a $ 1.4 billion FDI. Once the land reclamation is done, in order to complete the whole project, we will be able to attract another $ 13 billion as investment. That is based on today’s prices. We are building a world class city for South Asia. The objective of the project is very straight forward,” he said.

He also noted that the land reclamation of the project is due to be completed by June of 2019, as the land filling is nearing 90% completion while the breakwater construction is expected to restart in September this year, following the monsoon season.

Highlighting the current progress of the CPC and the due completion of Phase one of the CPC, Ming said, “The first phase of the city infrastructure constructions commenced last month, which included the work of the International Financial Centre (IFC) and Marina. Their infrastructure construction work is scheduled for completion by the end of 2020. 74 developable sites in CPC are currently being promoted to potential investors, and under phase one, 58 hectares of saleable land, out of 269 hectares of the reclaimed land, are expected to come into the market.” He also mentioned, “In addition to the IFC, there are several other projects outlined to be launched in the CPC, once the land area is reclaimed. One major aspect we are focusing on at the moment is the development of tourism in the country.”