Business

Condominium developers see silver lining

Published

1 year ago

2021/11/11

Sahan Weerasooriya

Despite Covid-19

By R P A Perera

Covid-19 has had a drastic impact on Sri Lanka’s economy. That countries around the world are also reeling with the effects of the pandemic is of little consolation. It is interesting though that condominium developers with completed projects or those nearing completion with full inventory are likely to reap large benefits.

The industry which took a major hit with the Easter Sunday bomb attacks in Colombo, in April 2019, began recovering last year. RIU – a multi-sectoral research company with a global presence with offices internationally – in its Annual Real Estate Market Report 2019-2020 states that the market which remained sluggish in 2019 due to a variety of reasons, began to recover in 2020.

Providing a look into the future, CEO and Founding Director of RIU Roshan Madawala said, “We can note that the industry had performed with tenacity and resilience during the past 1 ½ years, despite the extraordinary economic challenges. Within the next 5 years, Sri Lanka could face an under-supply of apartments and other real estate assets due to a combination of variables which would essentially navigate it towards establishing a sellers’ market. This situation would have been somewhat unthinkable even 24-months back.”

“The research and data that we are analysing now suggests that the present time is exceptionally propitious for residential real estate investments,” Madawala continued. “In 2020 and 2021, low-interest rates stimulated the market to enhance the absorption rates of the prevailing stock of apartments in Colombo. Simultaneously combined with the diaspora’s interest levels gathering to an all-time high and with airports slowly reopening, the influx of buyers will be significant. The market is more appealing than ever before to persons earning greenbacks, British pounds and most other currencies, due to the weakening rupee. The amalgam of these variables and the novel reality faced by developers, whose costs have spiked due to the new import restrictions and subsequently the overall currency depreciation effect, indicates that developers will find it impossible to supply the next generation apartment projects at prices that tally with the present market. Therefore, the likelihood of an undersupply is real.”

Dr M A K Sriyalatha, Senior Lecturer, Department of Business Economics, Faculty of Management Studies & Commerce, University of Sri Jayawardenepura commenting on the effect of the import restrictions and currency devaluation on the real estate market said, “Restrictions and devaluation affect the prices of imported raw materials and it automatically affects property development such as real estate residential house prices in the short-term. But LKR priced units have become much cheaper making them more attractive to foreign investors. Real estate players with unsold or built-but-unsold inventory will benefit through the sale at higher prices.”

“What’s more, the interest rates are at a historic low, with the real interest rate being negative recently. This makes real estate investments more attractive in 2 ways, i.e. borrowing to invest is more feasible, and the returns generated are more attractive,” she added.

“Share prices and profitability of pureplay residential real estate companies providing high quality products are likely to improve over the price and profitability of commercial real estate developers, given the working-from-home concept being widely used. The larger the projects and the inventory, the higher the profit. A house of one’s own could not only be an asset but could also provide safety,” Dr. Sriyalatha said.

“We live in a VUCA (volatility, uncertainty, chaos and ambiguity) world driven by rapid technological advances that impact all aspects of human activity and markets,” RIU CEO Madawala continued. “However, real estate has traditionally proven itself as a safe haven during such times and in 2020/21, Sri Lanka’s real estate market has proven its resilience. Commercial and retail real estate will however need to navigate a more fluid and challenging environment in the short-medium term.”

Quality and trust are of paramount importance in the residential real estate sector. Naturally, established players with a good track record are at an advantage. The developers’ brand, stability and financial strength are all critical since real estate developments generally are long-term developments, (i.e., they take a few years to complete from the launch), investors therefore need to be comfortable with the stability of the developer and the ability to complete the project. Even in the current circumstances, the larger players are more likely to be able to withstand the adverse conditions due to their greater financial stability.

Industry players who have large projects which are nearing completion or where the major portion of the construction and the import of materials is already sourced or procured, are likely to enjoy significant profits and these may be reflected in their share prices.

Mr. Brahmanage Premalal, Group Chairman Prime Lands (Pvt) Ltd, commenting on the demand for condominiums said, “The demand for real estate in Sri Lanka, especially residential condominiums continued to surge throughout the year, as investors were seen rushing to take advantage of the reduction in policy interest rates announced by the CBSL as part of its monetary policy easing measures in the wake of the pandemic induced economic slowdown. Similarly, the ban on vehicle imports and the ongoing devaluation of the Rupee also appeared to be fueling the interest in real estate, which I believe, were a few of the other contributory factors that worked in favour of driving up the demand for condominiums. Further as it is with the import controls & increase of prices in raw materials the actual benefit is for the buyers as they get much higher returns. We see this phenomenon all over the world as the real investment against the inflation & high money supply is investment in real estate”.

Some industry players are also hopeful that the project developments within the Port City which are expected to commence soon will bring in a higher demand specially for the developments in Colombo and the suburbs, since the expatriates will require accommodation to overlook construction and development.

A handout prepared by the government directed at potential investors outlines various development initiatives supporting the theme, Sri Lanka is the Rising Star of Asia. Among them is the development of beachfront luxury villas at the Port City Colombo. A significant feature is that foreign investors are permitted 100% ownership of the real estate investment. Access to sites and temporary utility facilities (water and electricity) are already available while permanent utility connections are to be provided by June 2022. END.

The author is an independent writer and could be contacted on rukshicap@gmail.com for more information.

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Business

Technical Certificates of Completion for 64 out of 74 plots of Port City Colombo SEZ

Published

21 hours ago

2023/03/23

Sahan Weerasooriya

Technical Certificates of Completion for 64 out of 74 plots of the Port City Colombo SEZ have been received by the Commission, a Colombo Port City Economic Commission semi-annual progress report for FY 2022 notes.

A press release by the Commssion said: ‘The Colombo Port City Economic Commission (the Commission), the Single Window Investment Facilitator authorised to assist investors, businesses, and residents in conducting their activities seamlessly and efficiently in Port City Colombo, is pleased to release its semi-annual progress report for FY 2022 from July to December 2022.

‘The Port City Colombo Special Economic Zone (SEZ) is designed to be a prestigious, strategically located city in the heart of South Asia, with sustainable high-quality public spaces and infrastructure, providing top-quality commercial, entertainment, medical, education and lifestyle. International destinations such as DIFC, DMCC, Labuan, Singapore, and Mauritius were studied for their regulatory frameworks, fiscal incentives, and operational efficiency to identify the most competitive processes and policies for Port City Colombo. The benchmarking study was done by global consultants such as Boston Consulting Group, PwC, KPMG, EY, Pinsent Masons, Zico Law, JLL, etc., for the SEZ’s thrust sectors, supported by market feedback on both fiscal and non-fiscal parameters.

‘Port City Colombo SEZ Regulations for the registration, licensing, authorisation and other approvals of Authorised Persons, were published by extraordinary gazette in September 2022, bearing number 2299/46. The SEZ’s Regulations for the registration and licensing of Authorised Person Fees, were also gazetted in September 2022, bearing number 2299/47. The registration of offshore company regulations were gazetted in the month of November 2022, bearing number 2306/54.

‘Agreements have been signed between the Commission and the Registrar General of Companies and Controller General of Immigration and Emigration in order to streamline services offered to Authorised Persons.

‘Sectoral Progress Highlights:

Banking – The Minister of Finance issued licences under the Colombo Port City Economic Commission Act to four (4) banks during the first half of 2022. The Commission has since received requests from three (3) more banks during 2022. Additionally, 10 Financial and Banking Regulations were also drafted under Sections 44 and Sections 45 of the Colombo Port City Economic Commission Act No. 11 of 2021 and are awaiting review with the Monetary Board of Sri Lanka.

Security – The Sri Lanka Police opened a Post on-site for visitor protection, with water access control and lifeguard services being handed to the Sri Lanka Navy. CCTV networks were also installed in public areas.

Social Infrastructure – In addition to an internationally-reputed hospital and school, the Commission has identified the need for a world-class university within Port City Colombo and modified the Master Plan accordingly.

Commercial Infrastructure – With the retail mall infrastructure complete, the commencement of the interior work has begun. The mall will showcase premium merchandise, with an array of cuisine options and entertainment, and is set to commence operations by Q2 of 2023.

Immigration and Visa Arrangements – In collaboration with the Department of Immigration and Emigration, the Commission has introduced three (3) new visa categories for Port City Colombo. These 3 visa categories are – the Investor visa for ten (10) years, the Employment visa for up to five (5) years, and the Resident visa for five (5) years. Port City Colombo visas allow supplementary benefits, such as visas for the spouse, kids, and other support staff members, which can be obtained under the primary visa applicant. The visa fee is USD 200 per year for each applicant. Visas are renewable as required and applicable only to Foreign Investors.

Master Plan Implementation – A planning committee consisting of key stakeholders was created to expedite the approval of building plans submitted under the Development Control Regulations (DCRs) for each plot of the Port City Colombo SEZ. The DCRs provide a clear framework for the development of buildings, land use, green spaces, utility networks, and sustainability measures, among other factors.

Preliminary designs for the Marina Development and Villa Project have been submitted by two investors, with several more plots in the final stages of discussion for lease.

Business

New wealth tax proposals exert negative impact on shares

Published

21 hours ago

2023/03/23

Sahan Weerasooriya

By Hiran H. Senewiratne

CSE trading activities yesterday were somewhat negative because investors were worried about the impact of the IMF-inspired new wealth tax proposals on citizens, market analysts said.

Apart from profit- takings, the effects of the new direct tax system on citizens created some confusion for stock market investors, analysts said. This was also highlighted by President Ranil Wickremesinghe in Parliament yesterday.

Amid those developments both indices moved downward. The All Share Price Index went down by 77.4 points and S and P SL-20 declined by 24.6 points. Turnover stood at Rs 1.5 billion with one crossing. The crossing was reported in First Capital Holdings, which crossed one million shares to the tune of Rs 33 million; its shares traded at Rs 33.

In the retail market, top seven companies that mainly contributed to the turnover were; SLT Rs 428 million (4 million shares traded), Lanka IOC Rs 115 million (651,000 shares traded), Expolanka Holdings Rs 98.7 million (716000 shares traded), Lanka Hospitals Rs 57.2 million (440,000 shares traded), Browns Investments Rs 51million (7.5 million shares traded), Capital Alliance Rs 50.40 million (1.5 million shares traded) and First Capital Treasuries Rs 46.2 million (two million shares traded). During the day 69.9 million shares volumes changed hands in 21000 transactions.

Yesterday the rupee appreciated against the US dollar. The buying rate was Rs 312.61 and the selling rate Rs 330.16. Further, the price of gold also reduced due to the rupee appreciation.

Business

Dialog, Sri Lanka Air Force & EWIS provides digital education to Ravaneswaran Tamil School, Trincomalee

Published

21 hours ago

2023/03/23

Sahan Weerasooriya

Dialog Axiata PLC recently joined hands with the Sri Lanka Air Force and E-W Information Systems Ltd to re-furbish the computer laboratory of the Ravaneswaran Tamil School in Kanniya, Trincomalee and upgraded the facility with digital educational tools and equipment. This worthy cause was initiated and directed by the Commander of Sri Lanka Air Force (SLAF) and the Group Chief Executive of Dialog Axiata PLC.

Dialog provided Magicbit Pro units with full pluggable and sensor modules to explore creativity with technology. Magicbit is an innovation platform and a STEM tool made for Internet of Things (loT), Robotics, Electronics and Programming. Dialog, furthermore, provided Nenasa TV facility and a pledged support for fully paid student broadband facility. Nenasa TV is a Public-Private-Partnership with the Ministry of Education; an initiative to support grade 1 to 13 students through eight dedicated TV channels in Sinhalese and Tamil. The content aired on each channel is provided and strictly monitored by the Ministry of Education.

The Sri Lanka Air Force in China Bay swiftly provided the labour for all civil work and assisted in repairing computers which needed attention, in a span of a few days. E-W Information Systems Ltd provided brand new desktop computers and sourced some of the hardware required to restore the remaining machines, together with Dialog.

Thamotharampillai Sivanantham, Principal of Ravaneswaran Tamil School, expressed his views on this occasion “Our children had an IT laboratory, but with hardly any usable equipment. Still one of our students won the Regional ICT award in 2022. I am very positive our students will fully benefit from the new ICT equipment and internet services. Additionally, our facility was beautifully restored in just a few days. On behalf of the school administration, parents & students I would like to thank Dialog, Sri Lanka Airforce and EWIS for coming together and providing us this service”.

The students and the school administration were overwhelmed by this generosity, a need for many years. Dialog also offered teacher-student training in the use of the technology and will continue to provide service and support on connectivity and together with the SLAF and EWIS would continue to monitor the progress achieved by the school through the provided technology and pledged further assistance in time. This worthy cause was executed parallel to the 10th edition of the Commanders’ Cup golf tournament in Trincomalee, which was sponsored by Dialog Enterprise.