Business Times

Shangri-La projects face major delays

By Bandula Sirimanna

Hong Kong-based Shangri-La Asia is delaying the start of construction work of the Colombo luxury hotel project and 300-room city resort in Hambantota due to some unexpected obstacles.

The Colombo hotel project designs are very complicated and it takes some time to begin the construction work, official sources said. The Hambantota project is also facing a ‘right of way’ issue raised by the owner of a land adjacent to this 99- acre private land bought by the company at a cost of US$3.5 million, which is out of a total investment of US$109 million. The planned start of these projects will be delayed till March next year and completed by early 2014, later than the scheduled date in 2013, these sources revealed.

Shangri-La has undertaken the development of 150 acres of land in Hambantota, purchasing 99 acres from private owners while the government has offered another 50 acres at Thiththapajjala. According to the sources, the 10-foot access road at Wimala Kannangara Mawatha to the resort site should be widened to facilitate transportation to the building site. But a resident who owned a nearby land is not giving the ‘right of way’ and this has become an obstacle to kick-start the project. Under this set up the government is now constructing another access road across a nearby neglected sapphire mine.

A government official said that the Hambantota project has not yet started and it will need at least three years to complete from the date of digging the ground. Earlier it has been planned to start the Hambantota project in August and complete its first phase by 2013.

He said the Colombo luxury hotel project will also be delayed due to the complex nature of the designs and it is expected to be completed by end 2014, later than the scheduled date in early that year. The development in Colombo will be a multi-use complex with high-end retail facilities, deluxe apartments and a 500-room seven star luxury hotel near the Galle Face Green promenade, where the Army headquarters is located.

Deputy Economic Development Minister Lakshman Yapa Abeywardane told the Business Times that Shangri-La has paid US$ 75 million initially to buy six acres of land and US$ 50 million thereafter, for another four acres totalling US$125 for 10 acres, in Colombo. “The transfer of ownership of this land followed state legislation and was only valued and conducted after obtaining approval from the cabinet of ministers and the Government Valuer’s future commercial valuation,” he said.

Shangri-La Investments Lanka (Pvt) Ltd was established to carry out the two projects. Construction work of the luxury hotel and residential villas in Hambantota at a total investment of around US$ 109 million (Rs. 12 billion) will get several tax-free concessions, according to a gazette notification. The project in Colombo will include a luxury hotel, high quality residencies and an up market shopping mall at a total investment of around US$ 283 million (Rs. 31 billion).

The company will get several tax benefits including a ten-year corporate tax holiday and a five-year tax exemption from PAYE tax for a maximum of 20 expatriate staff members, according to Finance Ministry sources.

The other tax benefits include exemption from payment of Withholding Tax on interest on foreign loans taken for capital expenditure, technical fees to consultants as well as management fees, royalty payments and marketing fees if they are paid to three subsidiaries of Shangri-La Asia Ltd, a senior official of the ministry said.

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