Japanese and Chinese interest in apartments
View(s):Retail sales in Sri Lanka’s apartment market have reduced owing to the current economic crisis, real estate sector analysts say.
“We have seen low consumer spending. Individual buyers are not buying,” an analyst said.
Corroborating this statement, a real estate sector developer told the Business Times that his sales have been low over the past three to four months. “Retail sales have been slow. This is mainly because our taxes have gone up and we have passed it on to the customers. So we see no consumer spending.”
As a result most developers don’t take up new projects. Another developer told the Business Times that land prices have also risen which has resulted in new projects not being viable. “Land prices in Rajagiriya that were at Rs. 1 to 2 million a perch has risen to Rs. 3 to Rs.4 million. So we are not buying land now because it’s not cost-effective. ”
He added that relatively new developers in the apartment business are finding it extremely difficult to sell their apartments as they may have only one or two projects.
“Established developers have many projects at hand. So they have the volume to sell. But new developers have a lot at stake. That is because they have just one to two apartment projects to sell. With the current economic climate they find it very difficult to sell their apartments.”
He noted that taxes increasing by 300 per cent overnight didn’t help either.
On the other hand the real estate apartment sector is getting a lot of foreign institutional interest. The analyst noted that many Japanese and Chinese investors are in town discussing apartment projects with local developers.
The first developer agreed saying that on Wednesday he met with a team of Japanese investors to discuss apartment projects. The second developer said that he met with Chinese investors last month and he will be meeting with some Japanese investors this week. “They want to look at building apartments with us. They want a partnership,” he said.
Either way it’s not a good story. This is because some investors want to construct and sell. Analysts say this will impact negatively for local contractors. “Right now local contractors are trying to survive. If these investors want to construct as well, the local contractors may be in for a tough fight.”
The first developer noted that foreign investments will not move fast into the local market because they have issues with the high taxation. “Right now it’s not an attractive market.”