BANKING ON STABILITY
A call for open-ended economic policies and political stability
The real estate sector today
Growing apace across the world; high-rise developments in Sri Lanka, Hong Kong, Singapore and Malaysia are being fuelled by rapid economic growth.
Barriers to sector growth in Sri Lanka
Political and economic instability, inconsistent economic policies, an unskilled labour force, the brain drain and limited disposal incomes.
The future of the local real estate sector
Will be vibrant given Sri Lanka’s location, and importance in China’s Belt and Road Initiative (BRI).
As a tourist and business destination, and for residency because of its natural beauty.
Strengths of the local real estate sector
Real estate will always appreciate in value due to limited space in an island while our geography and reputation as a tourist destination enhances its value.
Advantages of Sri Lanka’s geographic location
Proximity to India and China are key strengths; and the demand for education, leisure and medical tourism could be opportunities if developed.
Weaknesses of the real estate sector
Urban planning is poor and riddled with corruption; there are no real state incentives for sector growth and interest rates on home loans are very high.
Main threat to the sector
People cannot afford mortgages with interest rates exceeding 12 percent a year.
How this can be addressed
We need home loans as in the UK where the down payment is 10 percent and interest rates are as low as two percent.
The local market in a nutshell
Currently at its lowest due to inconsistent economic policies.
A struggle to lease commercial real estate means that
MNCs and local companies are downsizing, and leaving our shores with the prevailing economic downturn – this impacts the residential market as well.
The global market in a nutshell
Residential properties have attracted our diaspora as it’s easier to buy property in Australia, the UK and Dubai with less capital.
New prospective customer segments
Residential real estate between 15 and 25 million rupees; and commercial real estate between 300 and 1,500 sq ft.
Another promising segment
Low value rental market (i.e. Rs. 30,000-100,000) that picks up in times of recession.
Evolving consumer trends
As land prices escalate, homeowners in Colombo are selling their large houses for more compact and secure apartment living.
Office space market
More high-rises are expected with demand for ‘A grade’ office space.
Poor public transport and road networks, and an inefficient bureaucracy, have set Sri Lanka back regionally.
Productivity is affecting industrial and economic growth
Yes, construction workers are unskilled and unproductive compared to other countries – and numerous holidays and the largest per capita bureaucracy affect economic efficiency.
Corruption is affecting industrial and economic growth
Yes, corruption is rampant in Sri Lanka and a major cause of brain drain.
Future of the global real estate sector
Innovation is key as untapped markets offer rapid growth.
Impact of social issues on global real estate
The scarcity of natural resources and need for sustainability are often overlooked due to economic instability
It will have a greater impact on global real estate in the future.
Competition drives innovation
Fair competition certainly drives innovation and quality.
Fair competition is necessary because
Unfair competition stifles innovation and quality
How to create fair competition
Liberalise the economy further instead of protecting inefficient local industries – open-ended policies are needed.
Impact of the digital age on Sri Lanka
The nation is advanced when it comes to technology and the digital revolution will pave the way for new opportunities.
Impact of data availability on the world at large
Computer literacy, the availability of cheap smartphones and social media have led to an information overload.
To flourish as an industry
Proper planning and efficient implementation are required at the national level for long-term political and economic stability.
Initiatives for success
It’s crucial to ensure extended political stability instead of changing policies to attract voters. Fair competition and open-ended policies are critical too.
Impact of these initiatives
They will encourage foreign direct investments and investors, while protecting local industries as well as consumers to some extent.
Source from: https://lmd.lk/real-estate-sector-5/