Tag:
Sri Lanka Real Estate Market
While the painting of the Altair structure continues the fixation of glass windows also continues while the 63rd floor infinity pool and the sky garden are taking shape.
Click to enlarge
From left: Altair Director Pradeep Moraes with Chief Guest Maldivian Minister of Housing Aminath Athifa and members of the Altair team that participated in the Maldives Living Expo 2019
Sixteen months after structural construction was completed, Sri Lanka’s showpiece high-rise Altair continues to be an attention-grabber in markets around the world with the latest being the Maldives, where the development was one of the biggest attractions at the country’s longest-running property show. The Maldives Living Expo 2019, which was supported by Altair both as an exhibitor and a co-sponsor, attracted more than 5,800 visitors interested in luxury living options in the archipelago and the region. In its seventh edition, the three-day exhibition focused on home and living lifestyle, offering visitors an opportunity to get more information about upcoming real estate properties, products, services and options available in the Maldives and neighbouring countries. The 30 exhibitors showcased properties ranging from the utmost luxury to affordable living and lifestyle options.
Sri Lanka’s most distinctive and instantly recognised high-rise, Altair is a one-of-its-kind development in South Asia in terms of architectural design, structural engineering, and living experience. The building comprises of two tower blocks, a 63-storey sloping tower which leans in to a taller 68-storey vertical tower. Acknowledged as a new paradigm in contemporary living in Sri Lanka, the Altair building has already brought a new dimension in aesthetics to Colombo’s skyline and offers its 400 apartments spectacular views of the Beira Lake, the Indian Ocean and the city of Colombo.
Contrary to popular perception, apartments currently account for only 1.7% of Colombo’s residential facilities despite the scarcity of land to cater to rapid urbanisation, an industry leader has disclosed.
Representing Altair as a Director of the iconic development and the Condominium Developers Association of Sri Lanka (CDASL) as its Chairman, Pradeep Moraes told the Sri Lanka Investment & Business Conclave (SLIBC) that even after the 12,000 apartments currently under construction are completed over the next three to four years, this figure would only rise to about 4 to 5%.
In contrast, apartments account for as much as 70% of living accommodation in central Kuala Lumpur, 80% of central Bangkok and 90% of central Mumbai, Moraes said.
Stressing that condominium living was the only solution to increasing urbanisation in areas like Colombo where land is in short supply, he pointed out that if the area occupied by the Altair project had been allocated for houses, it would have been able to accommodate 54 minimum-sized units at most, whereas the development’s twin towers offer 400 spacious luxury apartments, with as much as 45% of total space set aside for public areas, which is much more than the industry average.
The presentation, titled ‘Residential Condominium Market – Sri Lanka’ targeted principally at foreign delegates attending the conclave, highlighted both the emotional arguments and the business rationale that underpin the attraction of the property development sector in Colombo, the fastest growing city in the MasterCard Global Destination Cities Index of 2015.
Moraes also disclosed that 90% of luxury condominium purchases are equity based, and that on average, 65% of purchases are by resident Sri Lankans, 27% by expatriate Sri Lankans and 8% by foreigners.
Quoting the findings of the global real estate services firm Jones Lang Lasalle he said 98% of completed luxury condominium projects in Colombo are sold out, while on average, 47% of projects under construction are sold out. These findings aresupported by statistics from RIU (Research Intelligent Unit) whose corresponding figures are 99%and 49% respectively. In the case of Altair, more than two thirds of its apartments have been sold.
Altair was the Platinum Sponsor of the 2018 Sri Lanka Investment & Business Conclave, themed ‘Partnering for Prosperity.’ The event was attended by 131 foreign delegates, while 128 local participants were registered to attend. It was organised by the Ceylon Chamber of Commerce in association with four government ministries, the BOI, the EDB, the Department of Commerce and the Sri Lanka Conventions Bureau.
Altair Director Pradeep Moraes was interviewed by Oxford Business Group, in his capacity as the Chairman of the Condominium Developers Association of Sri Lanka on how the real estate market is adapting to market changes.
In what ways do you see the capital gains tax impacting the local real estate market?
Moraes: Seeing as 10% is a modest tax, the impact would be minimal. A number of other markets have much higher levels of taxation and still experience vibrant real estate growth. The tax has been implemented in a clear and open way, the figure has been made public, and now the market can factor it in and go about its business.
Is there enough purchasing power in Sri Lanka to support further developments in the luxury residential segment?
Moraes: According to global real estate consultancy Knight Frank, Sri Lanka recorded the second-highest growth rate internationally in the ultra-rich community in 2016. In our experience, luxury condominiums continue to be purchased with over 90% equity and without borrowing. Over 90% of such developments are in the relatively affluent Western Province, predominantly in Colombo. Additionally, 99% of luxury and ultra-luxury apartments in completed projects and around 51% of those under construction have been sold, according to investment management company JLL, with over 60% of both sold to resident Sri Lankans. Most of the larger projects have been undertaken by reputable international developers who do not borrow locally and have certainly done their due diligence.
Like many countries, Sri Lanka has a hugely inequitable distribution of wealth. This, combined with the previously relaxed tax regime, has led to a gross underassessment of wealth, some of which is sent overseas. Luxury real estate offers a desirable and commercially sound option for attracting these funds into the local economy. There is certainly enough purchasing power to justify further luxury developments.
How the profile of luxury residential property owners changing?
Moraes: The current profile is 60-65% resident Sri Lankan, 25-30% expatriate Sri Lankan and less than 10% foreign. The low foreigner count is because the purchase of residential property in Sri Lanka is not linked to residency privileges, unlike several countries in the Caribbean, South-east Asia, and the Middle East, as well as certain Mediterranean countries in the EU. However, this is now being remedied with a proposal to grant residency visas connected to investment.
The recently inked comprehensive free trade agreement with Singapore, together with the enhancement of the existing agreement with India and those being negotiated with China and Pakistan are expected to encourage business relocation to Sri Lanka, which should have positive effects on rental markets.
How has the market reacted to calls to restrict lending to the real estate sector?
Moraes: The Central Bank of Sri Lanka has engaged with all stakeholders and is satisfied that the real estate industry is not a cause for concern. It has broadcast this view, going on, in fact, to say that the luxury segment was the least vulnerable.
As with markets everywhere, mindset and speculative concern can and will affect performance, as was seen in Colombo with the six-month slowdown in sales in 2017. Thankfully, this has now corrected, and sales are proceeding satisfactorily once again.
What impact would the introduction of real estate investment trusts (REITs) have on the Sri Lankan market?
Moraes: The benefits of REITs would be phenomenal for both the industry and the economy as a whole. Investments could increase exponentially, as REITs facilitate the entry of small local investors who otherwise lack the means to purchase as an individual. They also reassure foreign investors that their purchase benefits from professional guidance and market knowledge.
The stumbling block to the implementation of REITs is the issue of the 4% stamp duty payable to the provincial councils. REITs by their very nature propagate multiple transactions and it was feared that the business model could not sustain repetitive taxation. However, evaluation undertaken by industry players, the Colombo Stock Exchange and the Securities and Exchange Commission points to the aggregate of capital gains and rentals providing a cumulative return that remains attractive.
Therefore, steps are now being taken to revive the formulation and implementation of REITs, based on this belief in their viability and the scope for their productive participation in the Sri Lankan capital market.
Originally published on Oxford Business Group Website