Published on 05 December 2005 at 04:16 pm
Filed under: Asia:- Sri Lanka Property Guides » Sri Lanka Property Investment Facts
The property investment potential in Sri Lanka is broad and stems from two primary facts; firstly Sri Lanka is an incredibly popular tourist destination and secondly Sri Lanka is growing in popularity with Western second home seekers looking for an alternative and affordable winter sun destination.
International investors looking to profit from property in Sri Lanka are however restricted by the government currently, and those who commit to the Sri Lankan property market should consider doing so for at least the medium term.
Sri Lanka welcomes around 400,000 tourists annually and these numbers have not been negatively impacted by the 2004 Tsunami. However domestic residential accommodation, tourism accommodation, essential infrastructure and amenities have been negatively impacted and to this end the government of Sri Lanka have established a series of investment incentives to promote foreign investment into these particular areas.
Such investment opportunities could suit the international investor looking for a commercial sector where they would encounter no resistance in the form of excessive taxation or foreign ownership restrictions.
Commercial property investment opportunities in Sri Lanka currently range from making strategic investments in the tourism leisure sector to developing tourist accommodation. Alternatively there are also incentives in place for foreign direct investment into the reconstruction of domestic residential accommodation for the people of Sri Lanka.
Post Tsunami restrictions on the development of prime beachfront land have just been changed in Sri Lanka to make the country more attractive to commercial property investors too and now property constructors can build on land as close as 25 to 55 meters away from the sea in the south of the country and between 50 and 100 meters in the north of Sri Lanka.
For those seeking residential real estate investment potential in Sri Lanka the 100% taxation applied to purchases made by non Sri Lankan purchasers is off putting for many. There are of course ways to reduce or negate this taxation and larger investors choose to incorporate a certain type of company in Sri Lanka for the express purpose of circumnavigating this tax. For smaller investors this taxation is a nuisance as is the formation of a company structure to avoid the taxation. Most of the smaller property investors in Sri Lanka choose instead to purchase a 99 year lease on property and pay 7% tax.
For large investors it is worth incorporating and then directly targeting westerners who seek an alternative winter sun destination. As Sri Lanka’s best season occurs during North American and European winter months the country is hugely popular from November to March with American, British and European holiday makers and retirees. Many of these people look for properties to let out for the five month season and this presents another opportunity to the international investor seeking the strongest rental yield potential from property in Sri Lanka.
Properties favoured are those closest to the main resorts with easy access to the beach and all the local amenities and facilities. Properties that let easily range from affordable apartments with access to communal facilities to private detached properties with private facilities.
A growing number of overseas visitors seek to establish a base in Sri Lanka and there are opportunities for investors to develop properties for the express purpose of selling on to these individuals. Secure communities and properties with high specification interiors sell particularly well and second home owners coming to Sri Lanka now tend to be more affluent and can afford to spend more on their second homes.
Property investors examining Sri Lanka have to find the most appropriate investment path to suit their own specific criteria for profit. As stated the opportunities available to international investors are very broad but many opportunities are so specific and restrictive that an investor considering Sri Lanka should do so carefully. Caution should be applied to the selection of an investment type based upon initial and on-going costs, the realistic length of time until profitability and an individual’s attitude to risk and only then can an investment be made into the Sri Lankan real estate sector
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