Real estate and condos

At the construction site of a new apartment complex in Colombo, a security guard is unsure as to the work progress. There is no one else around. The site looks abandoned with a few bulldozers and tractors.

Elsewhere residents of a commercial cum apartment complex are worried about their title deeds which are yet to be received from the owner.

Many calls to the owning company were without success. “Where do we go from here?” asks a resident who says the complex lost its attractive reasons for people to invest in these apartments.

Is the construction boom ending? Last year when an Indian developer announced his posh condominium project, it was pointed out to him that the project was coming on at a time when the market was getting saturated.

“I feel there is a market with Sri Lankan expatriates. I am also a long term investor and not here for the short term,” he said with confidence. However his project site looked more abandoned than active earlier this week. The real estate and property market is one of the most popular investment tools for anyone. Many Sri Lankan expatriates and wealthy locals have been buying apartments for the purpose of selling it – sometimes even before the building is completed.

Call any condo developer and the first question they would ask is … “are you looking to reside in the building or is it as an investment?”

Colombo’s skyline is dotted with high rise apartment complexes with many springing up in Wellawatte where Tamil expatriates are grabbing anything on offer. Not anymore.

The real estate market is sliding for many reasons – an economic downturn, high interest rates and cost of borrowing, abduction of businessmen including developers and the general uncertainty.

Prices in prime areas have fallen like Kollupitiya for example where the per-perch price is down by nearly Rs 2 million. On the other hand, it’s a good time to buy – just the stockmarket example where the best time to invest is during a gloomy market scenario.

While most property developers lament that the market is down in the dumps with no takers, economists believe it is one of those cyclical periods where a general economic downturn affects all economic activity. It’s the same in the media industry where uncertainty has affected advertising revenues.

Apart from that inflation and high interest rates have raised the costs of production for most FMCG companies and the first cost cutting exercise is often advertising. But there are ups and downs generally faced by any industry and likewise the real estate and property market is also expected to recover.

However, a big problem faced by investors of individual apartments is that the developers scamper after the sale is made and don’t keep to their promises. The Sunday Times FT has often focused on this issue in the past where residents find delays in getting their deeds and the condominium facilities changing when the developer is stuck for funds.

Since most of the residents are expatriates or those who purchased these apartments as an investment, there is not much interest in chasing deeds or making sure promised facilities are maintained.

In the latest case at the Pacific property on Duplication Road, residents say they purchased their apartments based on the fact that there was going to be a shopping mall, restaurants, food court and a supermarket. “We paid for convenience shopping but now all that is gone,” said one resident.

The developer stuck for money has leased out the mall area of four floors to Dialog Telekom and the residents have lost their shopping facility. Appeals to the developer have failed.

The Condominium Management Authority (CMA) is an institution that appears to be without any teeth to tackle these issues and make sure developers keep their promises to tenant-owners.

Thus at a time when the real estate market is down and condo developers are desperately approaching would-be buyers of apartments, the latter is advised to beware of those who promise the ‘sky’ (like exclusive roof top gardens) and don’t deliver!