Nadeem Shums offers valuable insights into emerging trends in real estate

Compiled by Ruwandi Perera

Q: What are the latest developments in the real estate sector – including growth segments in the context of changing life­style priorities?
A: We are beginning to see an increase in the number of people investing in properties outside Colombo – mostly in beach and hill country properties, and as part of the island’s leisure-related real estate growth story.

With Sri Lanka’s tourism industry expected to bounce back in the aftermath of the pandemic – as national borders open gradually and airlines recommence servicing their traditional destinations – this is a segment that has the potential to grow exponentially.

Sri Lanka is also seeing more investors and homeowners starting to shift from landed housing on the periphery of Colombo, and investing in apartments closer to or in the heart of the city. This change is taking place mainly due to the convenience of apartment living and a change in the lifestyles of certain segments of the population.

Q: In the wake of the above, what are the implications of the lifestyle changes that we’re witnessing?
A: As a majority of people need to commute to the city for work, school and so on, those who were living in the suburbs or outskirts of Colombo are able to save two or three hours a day on the commute alone, by living in the heart of the city.

Q: In your assessment, what are the most effective marketing tools that real estate businesses should leverage on in this day and age?
A: Most developers are now adopting a ‘digital first’ strategy. The digital marketing landscape has changed the approach that real estate businesses take to reach out to potential customers – both locally and overseas.

One can now use extensive data analytics to streamline a business’ marketing efforts and ensure that they’re more cost-effective. With that said however, one cannot ignore traditional marketing media channels such as TV, newspapers, radio and magazines.

Q: How is the local real estate sector coping with the challenges posed by the pandemic – and could you highlight the chief factors that have helped in the context of sustaining the sector through the crisis?
A: The sector has performed well throughout the pandemic. And the main reasons for this are low interest rates and a shift of funds from fixed income to real estate investments, as well as a higher take-up of mortgages.

We have also witnessed a shift of some funds from the stock market to the property sector, which is considered to be a viable channel for medium to long-term investments and a good hedge against inflation.

There’s also been a surge in demand for mid-tier apartments that are competitively priced.

Q: In brief, how can financial inclusivity support the property market here in Sri Lanka – and how important is this to the real estate sector in this country?
A: This is a very important aspect that must be taken into consideration because the main challenge faced by young professionals who want to invest in real estate today is the issue of affordability.

Banks have come forward with attractive mortgage packages that require minimal initial payments as well as extensive grace periods for capital repayments.

The government has instructed banks to offer special interest rates to professionals with the option to fix the rate for a period of up to five years.

Q: And how does Sri Lanka’s commercial capital compare with other major regional cities – for example, Kuala Lumpur, Singapore and Mumbai – when it comes to apartment living?
A: Colombo is still in its infancy in terms of apartment living since currently, less than 10 percent of the city’s occupied housing consists of apartments – and these too are mostly in urban areas.

When you compare this with regional cities such as Kuala Lumpur, 60-70 percent of occupied housing in the heart of such metropolises consists of apartments. In Mumbai and Singapore on the other hand, this proportion is over 90 percent.

Q: And what implications are there for the domestic real estate sector from population growth and other such factors?
A: As the population expands in Sri Lanka, and tourist and expatriate numbers rise, we can expect to see an increase in the number of apartments being constructed.

In addition, as a result of the development of the Colombo International Financial City (CIFC – a.k.a. Port City), and other completed and ongoing infrastructure projects, there should be an influx of expats in the near future.

This will most certainly drive rentals up and thereby increase the demand for apartments by potential investors.

Q: And last but not least, could you outline the main challenges faced by the local real estate sector in this country at this time?
A: The foreign currency crisis and increasing construction costs have been challenges for most developers.

In the recent past, we have seen a sharp rise in prices of steel, copper, cables and freight costs – to name a few key variables affecting the real estate sector and construction industry. Some of these prices have risen mainly due to the pandemic and are expected to normalise once the situation is brought under control.

The interviewee is the Head of Sales and Marketing – Property Group and a Vice President of John Keells Holdings