Breaking news this month is sending a wave across Sri Lanka and the world – the 2017 budget has been announced, and leading property portal Lamudi claims,it’s great news for real estate! Following the end of the war, Sri Lanka’s property construction industry has been booming. However,strict laws on foreign nationals owning property were holding the real estate sector back. Many of these barriers will now be lifted – a great move for foreign investment in this rapidly growing economy.
Previous foreign ownership laws quelled sales
The real estate sector is a major element in any country’s economic landscape. Property construction has dramatically increased in Sri Lanka over the past 7 years, transforming the skyline of the capital city, Colombo, among other cities. Much of this property is considered high quality luxury property; something for the island’s construction firms to be proud of. However, the presence luxury real estate is only beneficial for the economy if wealthy buyers are investing in it. Until now, Sri Lanka’s government imposed laws upon the property sector, preventing foreign ownership and thus quelling sales. Since construction began to boom following the declaration of peace in 2009, a property surplus has been a serious concern. This surplus could hold back Sri Lanka’s growth as a destination for high net worth buyers, and ultimately buyers in general. Fortunately, Sri Lanka’s government has now recognised this, and steps are being taken to foster property investment both among local buyers and foreign buyers.
FDI encourages economic growth
Earlier in November, Sri Lanka’s Finance Minister Ravi Karunanayake expressed the key importance of encouraging foreign investment in order to boost the country’s financial position. In his speech, Mr Karunanayake stated that the government was to “remove freehold right restrictions”, which were previously imposed. Back in 2014, a ban was placed on the purchase of property by non-Sri Lankan buyers. This move was originally supposed to “curb tax evasion” (Reuters). On the contrary, as expected, it ended up holding the country back with its goal of competing in a global economy. Although there are still steps to be taken before a dramatic impact takes place, the government’s recent move to encourage foreign buyers puts Sri Lanka on the right track.
New prosperity thanks to future international investors
Thanks to its gorgeous landscapes and rich history, Sri Lanka is an internationally renowned tourist destination,but many visitors were left disappointed when they were refused land ownership in their holiday paradise. In the future, it is hoped that new properties will both be purchased and constructed by foreign nationals. As a result, the economy will experience a positive injection of prosperity.
Relaxed rules on bringing cash into Sri Lanka
In addition to the relaxation of the rules about home and land ownership, from 2017, further concessions will also be introduced. Foreigners entering Sri Lanka will be entitled to bring up to $45,000 with them, without needing to declare the source of these funds. This new allowance represents an increase of $30, 000.
As well as the measures outlined above, Mr Karunanayake also emphasised the potential benefits of real estate development trusts for the economy. REITs own and finance income-producing real estate, and their introduction fosters healthy real estate ecosystems. Healthy real estate ecosystems usually contain affordable housing as well as luxury accommodation. As evidenced by the recent speech, Sri Lanka’s government seems to appreciate the importance of a healthy real estate ecosystem. This means that the future for real estate policy looks brighter than ever!