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‘VAT surge threatens Sri Lanka’s housing and foreign investments’

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By Rohan Parikh

In the intricate case of Sri Lanka’s economic rejuvenation, the recent surge in the Value Added Tax (VAT) to 18 percent, coupled with the removal of certain industries from the exemptions list, has emerged as a focal point for concern among foreign investors assessing the country’s economic climate.

This shift, occurring within the context of an already sophisticated taxation structure, presents multifaceted challenges that, if left unaddressed, could potentially impede the nation’s growth trajectory, particularly within the critical housing development sector.

Investments in housing development surpass the realm of mere financial transactions; they are integral components of economic growth and societal development. The recent VAT hike, however, casts a shadow over the sector, raising the cost of projects and thereby creating formidable barriers for middle-class and first-time homebuyers.

This potential restriction threatens to stifle the housing sector’s innate ability to serve as a driver of economic stability.

The housing sector’s influence extends beyond bricks and mortar, reaching into the heart of local employment and manufacturing industries. This phenomenon, often referred to as the ripple effect, manifests when increased housing demand generates a surge in business for local manufacturers, including those producing doors, windows, pipes, wires, and other construction materials.

Consequently, this heightened demand directly stimulates job creation in these manufacturing sectors.

However, the introduction of the new VAT regime introduces an element of risk to this interconnected economic ecosystem. While the heightened VAT aims to augment the state’s revenue pool, there is a potential downside—deterrence for both local and foreign investors.

Investors, whether domestic or international, seek clarity, consistency, and predictability in tax regimes. The added burden of increased VAT may well tip the scales against investments that are crucial for sustaining economic growth.

In this intricate web of economic interactions, the call for relief or adjustments to the current taxation model becomes ever more urgent. Such measures are necessary to safeguard the housing sector and acknowledge its far-reaching impact on the broader economy.

Beyond attracting investments, a more balanced tax strategy has the potential to stimulate job creation, making housing more affordable for the middle-class and first-time buyers, who are the bedrock of societal stability.

The delicate balancing act between managing state revenue and propelling economic growth necessitates careful planning and consideration. The government, in navigating this complex terrain, holds a unique opportunity to transform challenges into opportunities, nurturing the housing sector while simultaneously fortifying state reserves.

A thriving housing sector will undoubtedly have a ripple effect, creating jobs and driving demand for local industries, contributing to a resilient and self-sufficient economy. The Sri Lankan Government’s response to the VAT hike should prioritise foresight and prudence, facilitating relief or adjustments to fortify the housing sector’s crucial role in economic growth. A nuanced tax strategy is essential, not just for attracting foreign investments, but for ensuring accessibility to housing, fostering a sustainable and inclusive economic future for Sri Lanka.

(The writer is an international investor with experience in the South Asian real-estate market, and is also the Chairperson of Iconic Developments)



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CEB calls for proposals to develop two 50MW wind farm facilities in Mullikulam

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The Ceylon Electricity Board (CEB) has announced an international call for proposals to develop two 50 MW wind farm facilities in Mullikulam on a Build, Own & Operate (BOO) basis. The initiative aims to bolster Sri Lanka’s renewable energy capacity, aligning with the government’s strategy to increase the share of clean energy in the national grid.

The bidding process, launched on behalf of the Cabinet Appointed Negotiating Committee, invites local and international project proponents to finance, design construct and maintain the wind farms under a 20-year agreement. The deadline for proposal submissions is June 12, 2025.

A senior electrical engineer at the CEB, speaking on the significance of the project, told The Island Financial Review: “This initiative is a crucial step towards achieving Sri Lanka’s renewable energy goals. Wind power is a key component of our strategy to reduce reliance on fossil fuels and enhance energy security.”

According to the CEB, interested parties can obtain the Request for Proposal (RFP) document by paying a non-refundable fee of Rs. 300,000 (or USD 1,035 for foreign applicants). The RFP provides comprehensive details on project requirements and evaluation criteria.

“Given the global shift towards clean energy, we expect strong interest from both local and international developers. This project not only supports our sustainability targets but also creates investment opportunities in Sri Lanka’s energy sector, the engineer added.

The wind farm project is part of a broader initiative to achieve 70% renewable energy generation by 2030, a key target set by the Ministry of Energy. Experts believe that projects like these will play a vital role in stabilizing electricity supply and reducing carbon emissions.

by Ifham Nizam

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The people crown Lolc for ninth consecutive year

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The Marketing Communication Team of LOLC Holdings, led by Susaan Bandara, Group Chief Officer- Marketing Communications, receiving the award.

LOLC once again emerges as the “People’s Financial Services Brand of the Year”, securing the prestigious title bestowed at the SLIM Kantar People’s Choice Awards 2025 for an unparalleled ninth consecutive year. This recognition, conferred through a comprehensive consumer research, reflects the brand’s firm connection with the Sri Lankan people and its consistent leadership in financial services.

Unlike many industry awards, the SLIM Kantar People’s Choice Awards is determined by independent consumer research conducted by Kantar, a global leader in brand insights. Instead of relying on a judging panel, this recognition is purely based on public perception, brand recall, and customer loyalty, making it one of the most authentic measures of a brand’s standing. Securing this title for ninth consecutive years highlights LOLC’s deep-rooted connection with its customers and its ability to evolve with their changing needs while maintaining a firm commitment to excellence.

Kapila Jayawardena-
Group Managing
Director/CEO of LOLC
Holdings PLC

LOLC’s continued success is driven by its assurance to financial empowerment, innovation, and inclusiveness. It has redefined accessibility to financial services by reaching underserved communities and pioneering digital transformation. Beyond its core financial solutions, LOLC is a brand that stands with the people, for the people, embodying resilience and hope through the years. In times of crisis, be it economic hardships or global disruptions, LOLC has remained a pillar of strength, stepping in when the nation needed it most. This deep-rooted connection with the people is what truly sets LOLC apart. The company has also been recognized for initiatives that create real social impact, such as the Divi Saviya Humanitarian Project, which uplifts vulnerable communities through sustainable support.

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Orient Finance reports robust financial growth for 9-month period ended December 31, 2024

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K.M.M Jabir Director/CEO of Orient Finance PLC (L) / Rajendra Theagarajah Chairman of Orient Finance PLC (R)

Orient Finance PLC has reported an outstanding financial performance for the nine-month period ended December 31, 2024, showcasing significant growth in key financial indicators compared to the corresponding period in 2023.

The Company recorded a remarkable 161% increase in profit after tax, reaching Rs. 254.6 million compared to Rs. 97.6 million in the same period of the previous year. Net interest income surged by 37%, amounting to Rs. 1.66 billion from Rs. 1.21 billion, demonstrating strong portfolio growth and enhanced operational efficiencies.

Total assets expanded by 28%, rising to Rs. 25.3 billion, while loans and receivables increased by 36% to Rs. 19.76 billion. The Company’s deposit base grew to Rs. 15.12 billion, marking a 19% increase, reflecting continued customer confidence. Meanwhile, total equity improved by 12%, standing at Rs. 3.86 billion.

Earnings per share (EPS) grew 163% to Rs. 1.21, up from Rs. 0.46, while net assets per share (NAPS) rose by 12% to Rs. 18.27.

For the month of December 2024, Orient Finance reported a Cost-to-Income Ratio of 68%, reflecting continued efforts towards cost management amidst challenging market conditions. The Gross Non-Performing Loan (NPL) Ratio stood at 9.62%, while the Provision Cover was maintained at a healthy 65.37%, demonstrating company’s prudent approach to credit risk management. As the quarter ended 31st December 2024, Orient Finance’s Tier 1 Capital Ratio stood at 13.14%, with the Total Capital Ratio recorded at 13.16%, both remaining comfortably above the minimum regulatory requirements.

Commenting on the results, Rajendra Theagarajah, Chairman of Orient Finance PLC, stated, “These exceptional results underscore our commitment to sustainable growth and operational excellence. Our focus on innovation and customer-centric financial solutions has strengthened our position in the market. As we continue to evolve, we remain dedicated to offering innovative financial products that meet the diverse needs of our customers while driving long-term shareholder value.”

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