Realtors witness sharp increase in land purchases by expatriates after rupee collapse

• Land market crashes amid soaring mortgage rates as liquidity drying up fast  
• Housing market still holds up as people rush to buy homes to avoid massive construction costs 

There has been a sharp uptake of properties purchased by the Sri Lankans living abroad since the rupee crashed in March making local assets far cheaper for foreigners and the expats while the land prices have also slumped quite significantly after the property bubble created by the record low interest rates blew up few months ago when the mortgage rates hit an all-time high. 

According to realtors, they observe many properties changing hands between the locals and the Sri Lankans living abroad as the latter found a new and rare opportunity to grab lands here at a significant discount from their sharply elevated levels at the beginning of the year.  

One leading realtor operating one of the largest real estate matchmaking sites said that expats are now spending only a fraction of what they spent before the rupee collapsed when buying lands. 

For instance, those who were investing up to US$ 200,000 are now spending only half the amount due to the double whammy which hit the land market in Sri Lanka—one coming from the cheaper rupee and the other from the overall collapse in the land market. 

Since the former Monetary Board decided to float the rupee on March 07 after exhausting all available foreign currency reserves, the rupee had plunged 80 percent, earning the dubious claim as the world’s worst performing currency. This sent the country’s consumer prices through the roof, significantly eroding the real value of money held by those who held rupees and thereby killing their ability to invest in properties or any other asset for that matter. 

People are seeking better deals in bank deposits, which remain the only viable investment at present for the majority. However, they do not provide an inflation hedge as deposits offer only less than half the rate of the pace at which the country’s overall consumer prices have been rising, effectively making holding any amount of rupees meaningless and thus drawing direct parallels between basket cases like Zimbabwe and Venezuela. The equally soaring interest rates to counter the surging inflation among other things have virtually ended the mortgage lending by banks, causing land prices which remained at elevated levels to collapse. Despite the land market crash, realtors say that the housing market still holds up as people are rushing to buy homes to avoid having to meet sharp increase in the construction cost as prices of construction materials have skyrocketed.