Tracking Real Developments Across Real Estate
GURGAON, September 1, 2014: International property consultancy JLL India has released its latest research report ‘Sri Lanka – Scaling New Heights’. In this report, JLL analyses developments across the real estate spectrum in Sri Lanka, identifies the demand & supply triggers and outlines Sri Lankan real estate’s growth opportunities in the future.
Gagan Singh, CEO – Business (India) and Chairperson – Sri Lanka Operations says, “Since 2009, improved confidence in the Sri Lankan investment market has triggered an escalation in property values. Apart from the effect of infrastructure projects, increased migration into Colombo from the country’s rural areas and outside its borders and renewed appetite to own property are raising real estate values. There has also been a steady increase in land acquisition within the central and secondary submarkets, thanks to limited availability in the city. In fact, Colombo witnessed an average increase of 5% in land prices in the first half of 2014, while select locations within the central and secondary submarkets saw rapid growth in land prices at around 7-8% since the end of 2013.”
The report covers:
The Sri Lankan Economy
After a brief slowdown in 2012 due to external uncertainties, the USD 59 billion Sri Lankan economy bounced back during 2013. Supported by increased domestic demand and improved exports & tourism, the GDP growth accelerated to 7.3% in 2013 from 6.3% in 2012. To improve productivity in the long term and have stable economic progress, Sri Lanka is proactively investing in various infrastructure projects, from improving transport networks to telecommunications and electricity generation.
Sri Lanka’s Residential Sector
High project development costs coupled with high borrowing costs for housing loans have breached affordability limits and restricted home buying prospects for middle class Sri Lankans in Colombo. Residents with limited income are forced to opt for properties that are at least 20–25 km away from the city limits. The majority of apartment projects in the central and secondary sub-markets rely solely on investments from HNI residents, non-residents and foreigners.
Residential Affordability Assessment
Affordability is calculated on the basis of the house price to annual income ratio. If the ratio is less than 5:1 the property is classified as affordable. The income segmentation for urban locations classified by the Income and Expenditure Survey 2012–2013 is taken as a proxy for Colombo’s income segment.
- Only the top 20% of income-earning households, i.e., 17.1% of the resident population in Colombo, can afford to buy their dream homes in Colombo or its suburbs.
- Apartments in the central submarket, upper-mid and luxury projects in the secondary submarket rely only on NRSLs, foreigners or HNW RSLs in Colombo.
Sri Lanka’s Office Sector
Colombo has around 2.6 million sq ft of Grade A office space, less than 5% of which is vacant. The Banking, Financial Services and Insurance (BFSI) and IT/ITeS sectors are the top two office leasing sectors in Colombo. While established domestic BFSI companies absorb office space that is anywhere between 3,000 sq ft and 15,000 sq ft, the IT/ITeS sector absorbs office modules between 10,000 sq ft and 30,000 sq ft.
Sri Lanka’s Retail Sector
As a prime business destination and a gateway for tourists, the retail market in Colombo is growing rapidly. The increasing disposable income and the rising living standards of Sri Lankans are changing their spending patterns and preferences towards better quality branded goods and services.
Sri Lanka’s Tourism and Hospitality Sector
On the back of the substantial growth observed in tourist arrivals and revenues since 2009, Sri Lanka’s tourism industry can look forward to the future with confidence. Interestingly, the tourism sector directly contributed around 3.9% of Sri Lanka’s GDP in 2013 and is estimated to have contributed around 3.5% of the total employment in the country. Driven by the promising growth in the tourism sector, Sri Lanka’s hotel industry has seen a flurry of activity.
About JLL Lanka
JLL Lanka is a leading professional services firm specializing in real estate in Sri Lanka. Based out of Colombo, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, project and development services, property and asset management, integrated facilities management, real estate capital markets and transactions encompassing commercial office spaces, hotels, land, industrial, retail and residential units. The Firm aims to combine local market knowledge with its access to global multinational relationships and capital sources, to provide Sri Lankan corporates, government agencies and clients with superior execution, towards transforming their real estate portfolios into efficient inventories, as well as in raising capital for real estate assets.
For further information, please visit www.jll.com.lk