Covid – 19 impacts on the Real Estate Market of Sri Lanka

May 1, 2020
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The economy is grinding to a halt. Will the real estate market follow?

The spread of COVID-19—the disease caused by the novel coronavirus—was officially declared a pandemic by the World Health Organization on March 11.

In Sri Lanka, we have 718 confirmed cases and 7 deaths from this pandemic disease of COVID-19. Sri Lanka is fighting successfully with a very high recover rate and also doing many PCR tests per day in order to battle COVID-19. But after recovering from the COVID-19 pandemic, will Sri Lanka’s Real Estate market remain as it was before the pandemic?

Sri Lanka has an estimated tourism industry that is worth more than $4.5 Billion. Due to COVID-19, it’s falling rapidly due to the total shutdown in Sri Lanka to fight COVID-19. With the economy taking a big hit on the market, the Real Estate industry will most likely fall due to the recession that is forecasted to be faced by Sri Lankans.

Real Estate markets during previous pandemics and concluded that while home sales dropped dramatically during an outbreak, home prices stayed about the same or suffered a slight decrease. This makes intuitive sense because it’s harder for prices to change when there are few transactions. In short, previous pandemics have simply put the real estate market on pause.

Real Estate Market of the Capital – Colombo

With the Real Estate market going into the pandemic was, in a word, tight. Consider Colombo, where property prices have risen drastically as it has become one of the country’s leading tech hubs. Due to COVID-19, the spending on any property purchase will be stopped and all big investments are likely to be paused. But after fighting COVID 19, there will be a high demand for properties around the capital of Colombo.  

  • Vendors wearing facemasks look for customers along a deserted street in Colombo. (AFP Photo)

Nearly a third of home building material inputs come from China, not to mention more finished products like bathtubs, sinks, appliances, and more. These supply lines have been disrupted. This could delay home construction at a time when it has finally picked back up. Since the financial crisis, home building has struggled to keep pace with demand because of the cost of construction, lack of available land, and a construction labor shortage.

This is significant because it suggests that the demand for housing is still there—it’s just a matter of waiting for the supply to return to the market. Taken together, the housing market appears like it will spring back into action once the virus allows for it to function again.

However, given the timeline for a home sale is usually a few months, the recovery will likely be gradual as opposed to instantaneous, and any recovery will still be subject to the virus flaring up again.

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Common Mistakes First Time Home Buyers Make

May 13, 2024
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Buying a home for the first time can be tiresome. Since you don’t have previous experience buying one, it is understandable to feel overwhelmed. If you are one of those buyers, this article could really help you to learn and have a smoother buying process.

Forgetting About Costs

Your loan will not be the only cost when it comes to buying a home. You have to take into consideration other costs like lawyer fees, property insurance, taxes, utility bills and any renovation or décor costs that will pile up soon. So it is wiser to check your savings to see whether you could cover these additional interrelated expenses.

Looking for a Home before the Loan

Don’t waste your energy and time looking for your dream home before your loan amount is approved. Because once you find your dream house, you don’t want to wonder whether you could afford it. Knowing your budget and whether you qualify for the loan and you could pay the monthly interest fee will make it easier for you to narrow down your options and makes the buying process efficient.

Being Too Picky

It is absolutely ok to have your preferences when it comes to buying a house. But if your preferences are too long or too specific, you might spend a very long time just looking for your perfect home. Do remember that you could anytime make alternations after you move in.  So always take into account what you want vs what you really need and be flexible to make adjustments.

Ignoring the Future

If you are thinking on living in the new house you are about to purchase, you will have to think bigger and way ahead of the future. You might decide to have children in a few years and then you will be faced with a set of new challenges such as does the house have sufficient bedrooms or is located with access to schools nearby etc.

Guide for Buying a Property in Sri Lanka

December 1, 2020
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Sri Lanka formerly known as Ceylon is an island country lying in the Indian Ocean and separated from peninsular India by the Palk Strait. Proximity to the Indian subcontinent has facilitated close cultural interaction between Sri Lanka and India from ancient times. At a crossroads of maritime routes traversing the Indian Ocean, Sri Lanka has also been exposed to cultural influences from other Asian civilizations. Ancient Greek geographers called it Taprobane. Arabs referred to it as Serendib. Later European mapmakers called it Ceylon, a name still used occasionally for trade purposes. It officially became Sri Lanka in 1972.

The buying process in Sri Lanka is not very different from many other countries. But the most important part about the buying process is to engage an independent lawyer or notary you can trust. As in almost every other country, the buying process cannot be completed without a lawyer or notary. If you are planning to buy property you should choose the one you can trust and if you are a foreigner, find a lawyer who speaks English, as well as the native language of the seller, in order to avoid communication problems or problems with the contract.

Finding a property can be quite hard since people from Sri Lanka often do not advertise what they sell but due to technological advances, there are online websites like Ceylon Property – where you can find all the latest properties for sale or rent in Sri Lanka. Also, there are real estate agents that can find you the ideal property. Real estate agents in Sri Lanka are not licensed so check their reputation and talk to other ex-pats or locals who have experience in buying property. Sometimes they charge a commission from both sides: buyer and seller. Try to negotiate and agree on a commission before you sign anything.

Negotiating the Price and Legal Checks

Having found the house or property of your dreams you should make an offer to the seller or negotiate the price. Be prepared for a lot of bargaining. Sri Lankans often raise the price tremendously when selling to a foreigner.

Your lawyer will check the deeds and the plan of property at the Land Registry to ensure that the seller is the only and legal owner. Further checks should be made for eventual debts or leasing agreements. 

If there are some ambiguities and you still want to buy it, you should buy a title insurance to protect you from any future claims to the land. Usually the ownership should be clear though (and it may not be the best plan to buy it if there are doubts).

Signing the Contract

If both parties agree on a price, the lawyer sets up a contract that seller and buyer have to sign. In the case that there are more owners each of them has to sign the contract. You usually pay a deposit of 10% of the whole price afterwards if you can’t pay all at once. Having signed the contract you need to pay a service tax to the local authority. It is about Rs400 – Rs5,000 (€2 – €30) and has to be paid every year.

After that, the seller needs to get a building and street line certificate from the municipality as well as a non-vesting and ownership proof. He also needs tax receipts for proof of payment of rates and taxes for the last quarter as well as the certificate of conformity in respect of the building.

Then the seller has to request an updated survey plan that has to be attached when applying for the registration later.

After finishing the deed of transfer, the stamp duty (around 3% – 4%) has to be paid at a nominated bank within seven days in favour of the responsible Provincial Council.

Finally the lawyer/ notary has to register the deed at the Land Registry and the new owner at the municipality. You receive a certificate of ownership. No deal is closed and legal until the new owner is registered.

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