Sri Lanka condo sales slow down

Hopes of a recovery ahead of VAT implementation in 2019

Colombo as seen from Galle Face. saha sanjeewa/Shutterstock

The condominium segment in Sri Lanka has decelerated due to uncertainty, the currency devaluation, and bottlenecks in funding, according to a leading analyst.

Monthly condominium sales in the island nation have dropped to just one to two units, compared with the average of eight to nine, the Mirror Business reported, citing property developers familiar with the matter.

The drop in sales volume is attributable to political instability, the depreciation of the rupee, and lack of funds, according to KPMG Principal Deal Advisory Shiluka Goonawaradene.

“It might change next year as VAT (value-added tax) is supposed to come into effect in April. Even if there’s a bit of a slowdown in the market due to current situation, it will pick up early next year,” Goonawaradene said.

The 15-percent VAT will be levied on condominiums from April 1. However, KPMG expects the market to evince signs of recovery in the first quarter of 2019.

With the tax in effect, prices of condominiums could rise by anywhere between eight and 10 percent, the consultancy predicted.

The depreciation of the rupee has already raised the cost of dollar-priced condominiums by around 20 percent, deepening the dent on sales of luxe condominiums.

A prolonged disruption in sales will have less impact on residential developers with wide access to funding, Goonawaradene told the Mirror. “If you are a small developer, who depends on sales to carry out your project, then you have a problem; you might have to be a bit generous in prices and extend the payment terms.”

Sri Lanka has 14,000 semi-luxury and luxury apartment units in the pipeline by 2020, the Mirror reported, citing data from the Research Intelligence Unit (RIU).