REAL ESTATE SECTOR
Compiled by Savithri Rodrigo
Neluka de Alwis
Q: How is the real estate sector performing in the present context?
Neluka de Alwis (NDA): The aftershocks of the Easter Sunday attacks have impacted the sector as a whole. Sri Lanka has much to offer but due to inconsistent policy making, the country and its people are held to for ransom. Life in Colombo is slowly returning to normal and one can only hope that the threat has been dealt with effectively.
Pradeep Moraes (PM): At present, post the brutal attacks of Easter Sunday, very dismal indeed. But Sri Lanka has been resilient through terrorism and insurrections in the north and south in the late ’80s, a protracted 26 year war, a devastating tsunami, multiple droughts and floods, and the political fiasco of last October.
The sector is very resilient despite all that’s being thrown at it. Short-sighted players in some industries viewed real estate as a threat, leading to immature puerile strategies that shrank the investment pie. But the sector has come through and passed the litmus test.
Q: Which key factors drive demand for real estate?
NDA Undeniably, capital appreciation of real estate signifies a growing ROI; people also have the option of living convenient lifestyles amid greater urbanisation due to the limited land bank.
PM Both organic and aspirational growth, and real estate, making for a sound investment, combined with rental earnings and capital growth – all of which lead to greater demand.
Q: How must catering to the demand for commercial real estate be balanced with residential concerns?
NDA By conceptualising more mixed used integrated developments that offer ‘live, work, play and stay’ concepts.
PM Sensible zoning laws and their proper monitoring within reason; also, an assessment of supportive infrastructural and supplementary facilities – these will nurture and support both the residential and commercial sectors.
Q: What are the main challenges facing the real estate sector?
NDA The government should boost the real estate sector by offering concessions such as deferring the chargeability of 15 percent VAT for ongoing projects, as the sector is bleeding due to depressed market conditions and the impact of a depreciating currency.
PM Negativity, conjecture, surmising, rumour mongering and canards are the main challenges.
And in a macro or present context, the general malaise in governance on the one hand, combined with the unconscionable political opportunism on the other – opportunism not only by politicians but also certain religious leaders – as well as the ugly rearing of chauvinism, bigotry and racial hatred with the capacity to debilitate and irreversibly destroy our beloved land.
Q: In your assessment, should real estate agents take steps to address the apparent glut in the luxury segment?
NDA It is important to understand the segmenting of real estate categories as lower, middle, luxury and super luxury in order to ascertain current market inventory. There is no glut in the luxury segment in Sri Lanka.
PM What glut? Check all the recorded data of the Central Bank of Sri Lanka et al. Over 90 percent of all completed apartments and 45 percent of those under construction have been sold. Does that sound like a glut?
Q: How is government policy affecting the real estate market?
NDA The instability of the government has crippled the sector as a whole and it continues to experience aftershocks, which have been cascading through the real estate market since the political debacle of October last year.
PM The ‘golden goose’ of real estate has been strangled over the last couple of years through unfounded speculation and irresponsible viewpoints. Let’s hope that by reimposing output VAT, strangulation will not complete thejob.
Q: In what ways can the authorities help promote investment in real estate?
NDA An improvement in infrastructure connectivity including expressways, ports and airports is imperative. As many high-rises are now seen in the construction industry, it would be prudent for the authorities to consider firefighting requirements for such buildings.
PM By being pragmatic and practical in realising that revenue collection goals are better served by growing the sector rather than carving a larger slice of a shrunken pie, and meaningfully supporting foreign direct investment (FDI) in real estate.
The aftermath of the October politi-cal crisis and again the Easter Sunday bombings demonstrated that investment in real estate is far less fickle than in several other sectors.
Q: To what extent do property seekers rely on real estate brokers’ recommendations?
NDA Due to the lack of professionalism and reliability, property seekers prefer to deal with developers rather than approach agents. This is because they feel that developers provide more accurate information.
PM This is at a nascent stage. Growth depends largely on the reputation of brokerage companies, their (hopefully) increased levels of professionalism, in-depth market knowledge and trained staff. It must evolve from the mere role of being an introducer.
Q: From a property owner’s perspective, what factors must be considered in selecting a real estate broker?
NDA Credibility and a better understanding of market trends are critical.
PM Professionalism, in-depth market knowledge and better trained staff, and the integrity to present a balanced and unbiased view of market offerings.
Q: How can Sri Lanka address the dearth of qualified real estate professionals?
NDA What’s required is a qualification process that offers a credible professional licence, thereby enabling those who are registered to act as real estate professionals.
PM All stakeholders must play a part as real estate and condominium development is yet to gain the recognition it deserves as an economic driver. The sector together with brokers must set standards, and ensure that self-governance is supported by an enabling frame-work, practical and non-obstructive monitoring, and knowledge enhancement.
Q: Is Sri Lanka likely to encounter a real estate bubble as suggested in some quarters?
NDA Sri Lanka is an emerging market so more international brands are investing in real estate. Macroeconomic factors must also be taken into account, which is a challenge amid predictions for the upcoming presidential election. As a sector specialist, I disagree on the real estate bubble.
PM It’s a definite ‘no!’ I reiterate what I’ve been saying for some years: real estate bubbles are created when and where there is a surfeit of readily available and affordable credit. Sri Lanka is certainly not one such place and therefore, the catalyst for speculation is absent.