15% VAT to be imposed on apartment sales – Is this is the right time to make a decision?

22 January 2019 09:50 am Views - 10238

The extensive development in the Colombo real estate arena is easily identifiable through the increasing number of investments in large scale property developments, with a pronounced surge in the condominium sector. 

Primarily concentrated in the Central Business District, these developments are targeting the growing high and middle income populations looking to invest in luxury housing in the residential market. While there has been a consistent increase in demand the urban and non-residential population, the potential for oversupply in the super luxury apartment segment is foreseeable with the large pipeline of opulent high-end developments. 

Over 9000 luxury and mid- units are currently under construction and due to be completed within the next three years. At present, urban apartment residents account for less than 6% of the population - indicative of an increased scope for growth of the industry. 

The high costs associated with the construction and development of condominiums in Sri Lanka results in an Whilst the heavy taxes and levies on raw materials and the construction sector account for a significant portion of the total cost, the re-introduction of 15% VAT on apartment units sold 1 April 2019 (to be absorbed by the developer) will see a further 8 – 12% increase in the prices of condominium units.

costs may see a stunt in the growth of the has seen a steady hike over the recent past. Whilst such actions may be required to generate revenue for the government, it could potentially create a degree the industry.

In addition, whilst policy development is necessary, it should be designed to take into account low income housing units and the need to improve affordability and accessibility to those in lower income brackets. This is especially significant due to the limited land availability within the city resulting in the increased need to build vertically - especially in the future, owing to increased internal migration to urban areas in Sri Lanka.  

To ensure long term sustainability of the is important that this sector is safeguard the interests of buyers, developers and the authorities.

The imposition of VAT with effect from 01st April 2019, will inevitably result in an increase in the price of apartments. Potential and investors looking to purchase apartments should consider making purchases before enactment in order to get the best value on an investment.

have become increasingly popular investments, especially in Colombo, due to their ease of convenience, guaranteed security and facilities that would definitely help in generating a better lifestyle to those residing. Whilst policy changes are bound to have an impact on the development and purchase of apartments – the growth of this sector will still be vital to the overall progress of the country.