Increased investor participation seen in local condominium real estate market

• Central Bank notes noteworthy increase in condominium purchases for investments in 1Q of this year
• Prime Lands expects condominium living to receive acceptance of mainstream markets in coming years

Indicating a possible shift in market dynamics, investors are becoming a key driver in Sri Lanka’s condominium real estate market with increased participation supporting the market to retain the momentum as they line up to take advantage of the prevailing low interest rate regime amid the ban on vehicle imports, inflationary woes and the ongoing devaluation of the rupee.

“… the dynamics of Sri Lanka’s real estate market appear to be changing. 

If this past year is anything to go by, we are now slowly seeing a higher share of investors coming into the market in contrast to a few years ago where buying interest was driven primarily by residential needs,” Prime Lands Residencies PLC Co-Chairpersons Premalal Brahmanage and Sandamini Perera told the company’s shareholders in their annual review. 

According to the Central Bank (CB), there was a noteworthy increase in condominium purchases for investments in the first quarter of this year. Around 25 percent of condominium buyers in the quarter cited their purpose of purchasing as an investment, up from around 20 percent in the previous quarter and below 20 percent one year ago. However, the majority of purchases in the period continued to be for residential purposes while purchase for rental purposes continued to decline in the quarter.

Meanwhile, the condominium buyers continued to rely on their own funds as the prime source of funding used for purchasing condominium units. However, the percentage of buyers who purchased condominiums through bank loans continued to rise, nearly making up 30 percent of purchases in the first quarter of this year.

According to CB’s Condominium Property Volume Index, there was significant uptick in condominium sales transactionsin the first quarter of this year when compared to the previous quarter. Although, the most preferred condominium units remain to be in the single condominium unit category below Rs.25 million, the share of sales in Rs.25-50 million and Rs.50-75 million categories recorded a notable growth in the quarter.

According to Prime Lands, the country’s requirement of housing units remains at around 100,000 units at a given time, while the annual demand for luxury units is estimated to be approximately 1,700 units.  

Meanwhile, there has been an increase in buying interest of condominium units in suburbs in Gampaha and Kalutara districts. Sales of condominium units in Gampaha and Kalutara districts in the first quarter made up 39 percent of the country’s condominium sales.

Further, locations such as Galle, Kandy, Nuwara Eliya and Nilaweli also saw increasing number of condominium sales in the period.

Brahmanage and Perera noted that the availability of potential real estate investment opportunities around the country would be critical to maintain the current momentum. 

Under its “affordable luxury” model, Prime Lands is planning to launch condominium projects in several areas of the country including Negombo, Matara, Kurunegala and Nuwara Eliya with its existing land bank.

Due to VAT reduction and the removal of NBT, Prime Lands Residencies PLC, Managing Director, Manjula Weerakkody noted that the company was able to maintain greater price consistency amidst rupee depreciation and pandemic related supply chain disruptions.  Moving forward, he expects the condominium living to receive acceptance of mainstream markets. “Going by the performance in the recent past, I am quite sure the sector will evolve at a faster pace in the coming years with the market becoming significantly more mature over the next 5 - 10-year time frame. In this scenario I expect condominium living to be accepted by mainstream markets across the country,” he added.