Chairman of the Condominium Developers Association refutes inaccurate media article under Right of Reply

March 8, 2019

Mr Pradeep Moraes in his capacity as the Chairman of the condominium developers association of Sri Lanka has issued a statement refuting the damaging Sunday Times article under Right of Reply.  The letter in full is produced below.

21st February 2019
Mr. Feizal Samath
Editor- Sunday BusinessTimes
Wijeya Newspapers
#8, Hunupitiya Road
Colombo -02

Dear Sir

We are compelled to request for the traditional right of reply to an article published in your newspaper last week which is malignant, misinformed and overwhelmingly incorrect and kindly request you to afford our reply equal prominence and positioning. We would also kindly request you to publish this rebuttal in its’ entirety.

This article quotes or misquotes (as the case may be) a gentlemen named as Mr. Ravi Abeysuriya said to be the Group Director of a Group called Candor.

We were shocked, angered and dismayed on reading through this article which was titled “Uncertainty in Sri Lankan Property Market” at the gross untruths, irrelevancies, insinuations and innuendoes which comprised almost the entire body of quotes attributed to him and rendered the article false, misleading and malicious in almost its entirety.

The tone of the article seems to seek to cause damage and wreak destruction on the Real Estate Industry.

The motives behind this unsubstantiated and untrue tirade we are unable to understand nor is it our business to try.

It may be an individual’s or company’s misguided belief, real or imagined grouse or vendetta. It could also be the belief that damaging one industry is the best means of propping up another or a case of complete ignorance combined with the presumption of knowledge.

It could also that Mr. Abeysuriya has been roundly misquoted in which case he joins all Real Estate stakeholders as being common victims of this article, and shares our empathy in the damage to reputation.

Let us do an elementary Fact Check.

  1. “Property Developers finding it difficult to pay back Loans”  – maybe true in a few instances, however this is made as a sweeping statement indicating that ALL Developers are in this predicament which is grossly untrue. Several of the larger developers are promoted by hugely rich international consortia, and many of the local developers lead the private sector in strength, broad base and profitability.

Also the statement implies that other trades / industries are free from any payback difficulties.

  1. “Most of the construction projects are on hold” – So hugely exaggerated as to be deemed “FALSE.” To our knowledge there is just one project of any significance to be temporarily stalled, not even coming close to damaging an industry average.
  2. “Enough and more property developers have gone bankrupt – again overwhelmingly untrue.
  3. “Real Estate market had 100% return and is gradually decreasing.” – This is an untruth of a different make up and is wonderfully vague, 100% in how long? It never had a 100% return in a year – perhaps across the board 100% in 5 years on a modest assessment of 15% year-on-year which has been evidenced and proven with some properties doing much better.

Conversely if the 100% referred to is over a shorter period and the rate is “gradually decreasing” then the sector is still doing wonderfully well and where is the problem?

  1. ” Rental income is coming down” – Yes and No. KPMG in their much lauded Report on “Paradise Island Luxury Living in the Tropics” published last year showed rental returns on condominia as between 5% to 9%, This remains broadly unchanged across the sector, and one must remember that this is in addition to capital gains which have been referred to above and which in combination yields (and have proven to yield) more than most other investments.
  2. Mr. Abeysuriya is quoted as saying that “there is a bubble in the market” and later saying “not yet in Sri Lanka” – so no real need to comment on this.
  3. “Close to 90% of 65% of sold apartments are bought by expatriate Sri Lankans” – this is completely false. Luxury apartments show 25% to 30% purchases by expat Sri Lankans, and the figures for mid-range and lower range apartments are much less.

This type of colossal inexactitude would be hilarious if not relating to such a serious subject.

Anyone disbelieving our outright rejection of this colossal untruth can cite right to information and check the statistics at the Land Registry.

  1. ” Sri Lanka is not able to attract foreign investment” – Again false, Sri Lanka attracted its highest ever FDIs in 2017, and figures in 2018 are expected to be close if not better.
  2. “15% VAT is a poor strategy to the Sri Lankan Property Market” – At last we are able to agree with Mr. Abeysuriya, and thank you Sir for providing us with this platform.

We respectfully submit to the Government and it advisors that a re-imposition of output VAT on apartment sales will not serve its intended purpose i.e increased tax revenue. It will shrink the sector to a size that yields far far less taxes than if allowed to grow to its natural, organic potential.

The industry has suffered over the last one and a half years or thereabouts as a result of ill-advised and perhaps irresponsible, and certainly baseless conjecture, surmise and speculation about its viability expressed by certain Govt., Public Service and Bank officials – again either quoted or misquoted within or without context.

This unfortunately fueled the typical Sri Lankan negativity and rumour mongering that sadly affected the momentum of the Real Estate Industry which was vibrant at the time.

The litmus test that the industry has passed though, the gauntlet that it has successfully run, is that despite the recriminations, and despite the prophets of doom, real estate in Sri Lanka has not succumbed to fear mongering.

The fundamentals of Sri Lanka condominia are extremely robust, and it has the demonstrated and proven capacity to (in very modest terms) generate at least $ 750 M / year in FDIs if even mildly supported to so do.

  1. The article goes on to state that there is no “independent data on the actual sales of luxury apartments ” – this is not only false but is an indictment on respected entities such as the Central Bank, KPMG ,Jones Lang Lassale and RIU ( Research Intelligence Unit) which have researched and distributed studies on the subject.
  2. “The data obtained by the Central Bank is based on the Land Index survey” – Again False. The Central Bank engages with our Association and its stakeholders in obtaining a report on activity on a quarterly basis, and I might add is very diligent and rigorous in ensuring that feedback is timely.
  3. “Buyers tend to pay full amount at once ” – False, most apartments commence selling from the time of the drawing board and obtaining  of preliminary approvals,  and payments in almost all instances are progress milestone based.
  4. ” Any approvals can be got by bribing officials at Govt. Institutions related to Land and Property” – we are not qualified to comment on experiences that Mr. Abeysuriya or the company he represents may have had (in fact we would be very interested to know whether they are in any  way connected with the Property sector, commenting with authority as they are), but we roundly condemn this statement as being an unfair, unjust and unwarranted vilification of  hundreds of Govt. Officials who discharge their duties without fear, favour or inducement.
  5. “Even if an Apartment complex starts building next door you have no say” – True, but that is the cost of reality, of development. Do we need to re-examine zoning laws, perhaps yes. But we cannot throw the baby out with the bathwater and say no to condominia, which is the only way out for Colombo (especially) to continue growing.

Overall we believe that it is way overdue for us to get together, within industries, and across industries, and promote Sri Lanka as a holistically appealing and viable commercial entity, because our equitable share of an expanded cake will be far bigger and far more wholesome than a slice we fight for at the cost of another.        

Regards,
Pradeep Moraes
Chairman
Condominium Developers Association of Sri Lanka