Sri Lanka has become a hot destination for international property investors - two years after the end of a decades-long civil war.
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The renewed interest is driving up prices, especially for developable land. Several resort and second-home projects are being built, targeting the type of investors and buyers who have been focusing on such destinations as Dubai, Spain and Mauritius in recent years.
"Now is the moment in Sri Lanka that everything is happening," says Magda Knop, a property agent based in France.
Ms Knop is working with a Belgian developer building three coastal villa projects and is hoping to attract buyers from Asia, India, the Middle East and Europe.
"The only thing they can buy at the moment is older colonial properties, but there is hardly anything new," she says. "That is what will emerge now."
Long regarded as a tropical paradise, Sri Lanka has a number of selling points for property investors, including 1,340km of largely undeveloped coastline.
An international airport is under construction in Hambantota in the south, and new roads should improve access to resort areas.
Tourism arrivals for the first five months of this year were up 40.2 per cent from a year earlier, according to the Sri Lankan tourism bureau data. That followed a 46 per cent increase from 2009 to last year, with most visitors coming from India, the UK, Germany and France.
Sri Lanka needs an additional 12,000 to 18,000 hotel rooms in the next five to 10 years to meet demand, according to the property consultancy Jones Lang LaSalle.
"This has triggered strong interest from domestic and international players who are now strengthening their existing lodging portfolios and scouting for new hospitality sites across the country,"a Jones Lang LaSalle report said.
To bolster property targeting international visitors, the government is offering land to developers at low lease rates, discount capital through state banks and tax breaks on the import of construction materials.
The government is also developing port facilities, hoping to attract trade traffic from other Asian countries. Foreign direct investment jumped to a record US$236 million (Dh866.8m) in the first quarter of this year, a 160 per cent increase from a year earlier.
"As long as the government continues along the line of aggressive infrastructure, the country is poised for growth," says Nathan Wills, the chief executive of Ataraxia Capital Partners, an investment company in Sydney.
Ataraxia has launched a $20m fund tracking the Sri Lankan stock market, hoping to capitalise on the country's GDP growth, which is expected to exceed 8 per cent a year. "It's on the radar of a lot of investments funds," says Mr Wills.
Property investors are focusing on undeveloped land that can be used for future projects. Attractive coastal parcels are available for€60,000 (Dh320,000) to €75,000 a hectare, much less than other tropical destinations.
Developers in Asia have been particularly active in the past year, proposing some of the largest projects in the island's history.
The Chinese company CATIC is backing a 4-hectare hotel and shopping mall complex in Colombo, while the Singapore investor SPTao is behind the $350m Havelock City, a 6.8-hectare mixed-use development under construction in the capital.
Also in Colombo, the Hong Kong-based Shangri-La Asia is building a 500-room Shangri-La hotel, the first in Sri Lanka. The teardrop island is also attracting second-home buyers and pensioners, who see the country as an alternative to more well-travelled destinations.
"I now get far more enquiries from people living in the UK as well as expats in Hong Kong, Singapore, Dubai, UAE, and my clients from Thailand who are looking to invest elsewhere," says Sue Fitzgerald, the managing director of Property Perfect, a consultancy in Hong Kong.
Foreign nationals are allowed to own property on the island, but there is a 100 per cent transfer taxon individual purchases. To get around the tax, most foreigners use a corporation to buy property, agents say.
Although there is little hard sales data available, Sri Lanka property prices missed out during the global property boom of 2005-07. Bargains can still be found inland, where a plantation on 40 hectares can be picked up for less than $200,000, Ms Fitzgerald says.
Several projects are under development on the east coast, which was heavily affected by fighting for many years, opening up new areas for tourism and people wanting to buy second homes.
"Prices rose dramatically after the war ended," says Ms Fitzgerald. "But now they are rising more steadily as foreign owners try to cash in and the remaining local sellers in popular areas … have a better understanding of the value of their land."
kbrass@thenational.ae
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
More on Quran memorisation:
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Killing of Qassem Suleimani
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
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Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
In numbers: PKK’s money network in Europe
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Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
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Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
