Real estate developments within a green environment
Sri Lanka, an island of some 65,620 sq. km and a population of 21 million, has traditionally maintained human development indicators that are comparable with those of advanced countries with literacy rates exceeding 92 per cent. The economy measured in terms of per capita GDP has always led the pack amongst South Asian economies and the post war (2009) performance has further propelled the island economy into middle-income status. In 2013 GDP per capita stood at US$3,282 and Sri Lanka had upward rating revisions from all the major agencies including Fitch, Standard and Poor and Moodys.
Artist’s impression of upcoming Altair development
By 2016, the island is expected to reach the status of ‘high-middle-income-country’ like Malaysia or Thailand. Consequently we have witnessed an increase in the island’s prosperity as measured by the Global Prosperity Index with both local and returning expats contributing to the economic revival. Prevailing trends include a hike in the importation of luxury vehicles, a rise in overseas travel, large numbers entering privately funded education including universities in the West and the entry of a large number of up-market brands into the retail sector.
With the economy growing at an average of 7.2 per cent since 2009, the island’s real estate sector has enjoyed consistent growth under-pinned by double-digit growth (2013) in the construction sector.
In addition to housing, growth in the construction sector has been spurred by ongoing expansion projects at the port, the rolling out of several expressways and major urban infrastructure projects. Whilst regional disparities remain across the island in terms of growth rates and share of GDP, it is clear that the Western Province dominates the economic landscape. As a result of the geographic economic landscape, growth in almost all real estate market segments has tended to be concentrated in the Western Province with the Colombo district receiving the lion’s share of investment for high-end residential housing, commercial buildings, retail malls, serviced apartments and hotels. The outstation districts have witnessed developments in the middle-income housing market as well as a significant expansion in hotels and resorts, with beach front properties gaining significantly in price.
High-end Residential
The luxury apartment market, defined in terms of price and also the features and fittings on offer found its first wave of activity during the cease-fire agreement between the government and the rebels (2003-2007). During this time, the island enjoyed several years of peace and significant numbers of expat Sri Lankans started to take a strong interest in investing and living on the island. However, it was the dawn of permanent peace in 2009 that really set off the market and we can note that the skyline of the capital has continued to be shaped by high-end residential developments that have sprung up in large numbers. Moreover, the projects currently under construction will further accelerate this process and serve towards transforming the capital towards becoming a major regional hub for tourism, commerce and luxury living.
The Economist Intelligence Unit (EIU) country file on Sri Lanka notes that “what is true for the economy as a whole is less applicable for luxury urban apartments, where demand tends to come from a very small segment of the population. The island’s high-earners have also enjoyed rapid growth in incomes in recent years, and median monthly incomes for the top 10 per cent of households rose from Rs. 66,500 in 2006/07 to Rs. 126,868 in 2012. “However, with luxury apartment prices in Colombo starting at around Rs.20 million ($153,000), we can note that it is a very small percentage of the resident population of high income earners that are in the market for apartments that can at times top $1million.
Supply of apartments
Nevertheless, it is clear that Sri Lanka has enjoyed a sustained growth in the supply of high-end luxury apartments. In 2009, the luxury housing stock stood at 783 units. By 2014 this number has increased to 2657 and if we calculate the number of developments that have been approved or are currently under construction, then the number of units will top 4239 by 2017 according to RIU research findings. It is possible to observe that most developments have introduced between 100 and 200 apartment units at a time. However, some of the developments currently under construction are of a larger scale and will contain up to 450 units.
The leading players in the market include CT Properties, JKH, Ceylinco Homes International and Fairway Residencies.
According to RIU’s primary surveys, concepts of green environments and low carbon footprints are important to residents of condominium dwellings. They also claim their willingness to pay an additional premium for green buildings and are aware of long term energy savings.
Sri Lanka has some track record of innovation in green buildings. For example, local experts on Energy and Buildings from Moratuwa University were involved in the highly acclaimed Brandex LEEDS Platinum project. One available option to pursue a green building structure is to use the technology offered by the ‘building-blocks’ construction companies. This approach uses cold galvanized steel under a building-block approach that can expedite the construction process by up to two years, thereby minimizing the environmental impacts.
However, there may be unforeseen risks. Prof. Nanda Munasinghe is currently researching corrosion and it points to a direct relationship with the distance from the sea. Coastal area is defined as 1-3 km from sea. However, there are other factors that include oxygen, humidity, water/rainfall, wind and sulfur dioxide that affects corrosion rates. Sri Lanka has high humidity and high wind and rainfall due to having two monsoon seasons. Therefore, by international standards, Sri Lanka has a higher propensity for corrosion of steel. In this regard, any deviation from tried and tested methods of construction will need to consider the unique atmospheric conditions of the island.
The older buildings like the Grand Orient Hotel are over engineered with large beams and columns. By contrast some of the modern buildings seem to cut it fine, according to Prof. Munsinghe. Therefore, a small amount of corrosion could have a signification impact on the load bearing capacity.
Nevertheless, the green approach is gaining popularity world-wide and it can also be incorporated with the Smart Building concept to maximize synergies between energy efficiency and technology.
In conclusion, we can note that Sri Lanka has a long tradition of living in harmony with nature and our old architecture can be an inspiration for the new and emerging mega developments that are being erected in and around the capital. Research also points to a good level of market interest in green technology so it is hoped that more developers will meet this demand.
(The writer could be reached at roshan@riunit.com)