Sri Lanka’s Property Market Suffering

Sri Lanka’s property market was already suffering following the government’s reintroduction of the 100% property tax that’s levied against foreign buyers of Sri Lankan real estate, but since December 2005 when the Tamil Tigers increased their violent efforts to secure a homeland in the nation, the Sri Lankan property market has been a no go area for most investors.

The 100% taxation applied to the foreign purchase of Sri Lanka property by the government was a hurdle to accessing a potentially strong marketplace - but not a hurdle that could not be overcome. 

Investors determined to access the real estate arena in Sri Lanka were prepared to use various legitimate taxation avoidance vehicles and schemes from trust or company ownership of property to leasing arrangements, but the intensification of violence in Sri Lanka has made the vast majority of property investors look elsewhere for opportunities.

This is such a shame on so many levels because it means that this stunningly beautiful nation and the vast majority of its people who are peace loving are not benefiting economically from foreign direct investment that was keen to commit to Sri Lanka.

The rescinding of investment is not only affecting Sri Lanka property, the nation’s tourism market has slumped and local hoteliers and business people are severely suffering financially. 

One of the latest suicide attacks by the Tamil Tigers was in Galle, a popular international holiday destination and one in and around which many investors had previously been interested.  The attack did not target international citizens but it has resulted in many holiday makers canceling their trips, almost all property investors withdrawing from projects and governments such as the Australian and US governments advising their citizens to stay away from Sri Lanka for the time being.

Internationally hosted peace talks aimed at bringing the Tamil Tigers to the discussion arena and achieving a cessation of violence in Sri Lanka are scheduled for late October 2006.  Everyone - locally and internationally - is hoping that the foreign peace envoys who have already arrived in the nation will be able to bring about an end to the violence and start positive dialogue and that this will once again allow Sri Lanka to develop economically and prosper.  We’re keeping our fingers crossed for the sake of the Sri Lankan people.

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