Condo builders to increase prices
View(s):The impact of the US dollar hike has forced Sri Lanka condominium developers to jack up apartment prices.
Most builders are trying to keep their heads above water now and the only way to do is to raise prices of the condos, an apartment developer told the Business Times.
As much as 40 per cent of the total input materials in a condominium are imported and the rising US dollar is adversely impacting builders ‘costs. Cement, along with iron and steel, sand and bricks, is among the major materials in use in the country. Builders say the cost of construction is now higher, particularly the costs associated with materials and workers. “Going forward we are pricing apartments with the US dollar estimated to reach Rs.190,” another condominium developer told the Business Times. Currently the dollar is trading in the Rs. 173-175 range.
This means that some mid range to high end apartments will cost at US$300 a square foot from the earlier $220 a square foot. Add VAT to this which kicks in from next April and builders are in a real soup. The second builder said this month they will sell about 15 apartments in total. This is mainly owing to them finishing two of their projects. But what follows is not certain, he said.
This is what many say. The second builder also noted that next month is an uncertainty. This uncertainty is also stemming from the current political upheaval that Sri Lanka is witnessing. President Maithripala Sirisena late last month withdrew from the National Unity government and fired Prime Minister Ranil Wickremesinghe, swearing in Mahinda Rajapaksa, who ruled the country from 2005 to 2015 before being defeated by Mr. Sirisena.
The economic ramifications of this move are far reaching, especially for those in the construction industry, analysts say. With the foreign exchange reserves which have been sliding, pressuring the local currency amid broader problems in global emerging markets, this sector will be hit hard, they say. The latest political turmoil could further weaken international investor confidence.
File picture of a condominium under construction.
The second builder noted that all their buyers are locals this month.”Foreigners are hardly buying now. A few months ago we had some strong inquiries from interested foreign buyers. At least we used to get one inquiry for a month from foreign countries. But during the past week we haven’t got any,” he said. An analyst noted that many Japanese and Chinese investors who were in town a few months ago discussing apartment projects with local developers are seemingly silent.
The first builder agreed, explaining that the political crisis has impacted his apartment sales as well. He is not very positive on whichever party that forms a government within the next few days. “Either way we are not in a good footing. This is mainly because whoever comes to power cannot bring the dollar down. Already the damage has been done.” He also added that impact of impending policy changes of Mr. Rajapaksa’s premiership which will be decided on November 14 (when Parliament meets) may hinder further growth in the apartments sector.