Apartment developers are shifting locations
View(s):Competition amidst ‘crazily high prices’ is pushing those in the apartments industry to seek out different investments, which might take them to markets where ‘they traditionally haven’t gone’.
The weakening apartment market isn’t too good for the investors, developers and landlords, many of whom have now gripped the demographic realities in their apartment unit locations. But it turns out that they haven’t done too badly.
When analysing a possible investment, Hemaka Alwis, Chairman Fairway says that he looks at the same fundamentals in mid-level markets as he would in larger ones – favourable location, good schools, close proximity to jobs and retail and good hospitals. He built a 240 apartment complex in a 3.5 acre plot in Galle and has finalised plans for the second project 500 meters from the Galle Fort with all this in mind.
Why so far away is what many would ask. Well, he says that for one he decided on Galle as the city is always associated with a lot of romanticism. “Anyone would want to own a land/property there.
Bringing in a fresh perspective to why Fairway decided on Galle to put up an apartment complex, he says, “Well from Panadura to Matara almost all beautiful bungalows were owned by foreigners. This made land/property expensive in that area. To obtain a perch inside Galle Fort one needs a fortune – you can’t get it for under Rs. 15 million so there wasn’t anything reasonably priced for locals to buy,” he explains. This was an opportunity when Fairway decided to set up Rs. 18 million and above apartments which saw only 15 per cent foreign purchases. “All the rest were locals and most were from Colombo buying their holiday homes,” Mr. Alwis says.
The second complex in Galle however will be catering to slightly up market clients and mostly from Colombo.
Nivasie is another developer that has set up complexes ‘out of town’. So who’s buying them? Their apartments in Nilaveli have been lapped up by local and foreign bankers, Sri Lankans in tourism and some locals as retirement homes. The prices in these apartments range between Rs. 30 million to Rs. 50 million, an official told the Business Times. He said that the company is now discussing about setting up a similar apartment complex in Galle.
In the early days it was mostly wealthy foreign nationals who used to buy apartments out of town largely as investments. Mr. Alwis said that in the local market as many as 60 per cent of units are not primary residences and today, many of these buyers are locals.
Aitken Spence’s Heritage Grove in Negombo is another good example of a company catering to those buying out of town. They are a firm which doesn’t believe too much in space in the sky. “All are planning to go vertical, but we are doing a horizontal complex where each unit is about 20 perches,” an official told the Business Times.
He added that during the last five years the real estate sector has boomed but with high pries many buyers aren’t keen as these units don’t have resalable value. “So many buyers prefer units which they can rent for leisure, etc which are out of town.”