How can foreigners purchase real estate in Sri Lanka?

The process of purchasing real estate by foreigners in the global real estate market is quite complex and multifaceted. This is especially true for citizens of other countries who wish to buy property in Sri Lanka.

They face a number of tax obligations, including a land tax that is 100% of the value of the purchased property. This means that, in effect, for foreigners, the amount they will need to pay is equal to double the value of the real estate.

Ways to minimize tax expenses

But there are several legal ways to minimize such financial burdens. One of them is choosing an apartment in a condominium located on the fourth floor or higher. It is important to note the following:

• Foreigners do not have the right to fully own houses with land plots.
• Alternative options are available for such properties, such as long-term leasing or purchasing through a legal entity registered in Sri Lanka.

Renting as an alternative

A popular option for reducing tax expenses is renting an apartment for a period of up to 99 years. In this case, foreigners will effectively be able to own the property, allowing them to sell or rent it out without restrictions.Moreover, in this case, the land tax on the purchase is significantly reduced and amounts to only 7%..

Legal entity registration

As for legal entities, foreigners can become co-founders of a limited liability company, owning up to 49% of the shares. In this case, the local partner will control the remaining shares, ensuring full access to legal powers and holding 51% of the shares. There are also public limited liability companies that can acquire real estate in accordance with the land legislation adopted in 2018.

Current market conditions

Currently, the real estate market in Sri Lanka appears to be“buyer’s market”This is related to lower-than-expected demand from foreign buyers, as well as economic difficulties and the outflow of investors and developers. This has exacerbated the current situation and led to a decline in housing prices even before the pandemic began.

The economic climate in the country has worsened, and Sri Lanka is facing a deep economic crisis accompanied by mass protests; however, this has not affected the popular resort areas.

Devaluation of the local currency

One of the consequences of the crisis was the devaluation of the local currency, the rupee, against the US dollar.This circumstance contributed to the increase in real estate prices in the local currency.However, for foreign citizens whose funds are held in stable currencies, local housing has become more attractive for investment purposes.

Price dynamics in the market

It is worth noting that trends in the real estate market in Sri Lanka are also reflected in price dynamics. For example, the average prices of houses with multiple bedrooms show significant fluctuations, alongside changes in the prices of apartments and land plots.

For a more thorough analysis of real estate prices, one should refer to statistical data that presents indicators for various types of housing and regions, including the capital of the country — Colombo. Sri Lanka offers a variety in the real estate market — from luxury apartments to modest homes, making this market quite diverse and accessible for international investors.

Overview of bungalows and villas

Bungalows and villas are usually located outside the city limits, in quiet places away from the energetic pace of life in megacities. These are traditional housing options for local residents. The market offers both luxurious homes with various amenities and more affordable living options. Apartments, on the other hand, are primarily concentrated in the capital and major urban areas, where their availability is limited. In recent years, new condominiums aimed at the premium housing segment have been actively developed in resort areas.

Real estate prices

According to the latest data for the third quarter of 2022, the average cost of houses in Sri Lanka is about143.5 thousand euroswhile the average price for apartments is slightly higher — about182.3 thousand eurosThis is due to the fact that a significant number of residential complexes are located in modern and high-end buildings, while the market for country houses offers more affordable options and properties from the secondary market.

Regional differences

The highest prices are usually observed in the capital of Sri Lanka. Here, the average price for villas reaches466.21 thousand euros...while the cost of apartments fluctuates around...201.5 thousand eurosOn the west side of the island, house prices are significantly lower and are around127.26 thousand eurosIn the south, prices are slightly lower.91,500 eurosIn the Central Province, the average cost of houses is approximately105.1 thousand eurosand in the Northwest Province — about75 thousand eurosIn Sabaragamuwa, the indicators are slightly lower, amounting to less than107 thousand euros.

Affordable options at resorts

At resorts located a few kilometers from the sea, more modest cottages suitable for accommodation are offered, with prices starting from50 thousand eurosFor example, a new residential complex in Kurunegala, Sri Lanka offers interesting options that are worth learning more about.

Immigration questions

Regarding immigration aspects, in the fall of 2022, Sri Lanka launched a new initiative in which the Investment Board, together with the Department of Immigration and the Ministry of Defense, offered long-term visas for condominium owners. Investors who decide to purchase property in such complexes will be able to obtain long-term visas based on the size of their investments and the value of the property.

• For example, investments at the level200 thousand dollarsallow individuals to obtain a ten-year visa for the urban area.
• Investors who have invested150 thousand dollarsThey will be able to obtain a 5-year visa.
• To those who purchase a property for an amount starting from75 thousand dollarsIn the suburbs, one can also expect a 5-year visa.
• Legal entities that have made investments from500 thousand dollarsThey can obtain a 5-year visa, valid in both urban and suburban areas.

Support for the economy through "golden visas"

Institute“golden visas”It represents one of the mechanisms aimed at supporting the economy of Sri Lanka, which is in difficult conditions. This project is expected to have a positive impact and lead to increased interest from foreign investors in local real estate.

Choosing an object for purchase

When choosing a suitable property to purchase, it's important to approach the process responsibly. Once you have identified the desired real estate, it makes sense to contact the seller to discuss all aspects and details of the agreement.

Introduction to Real Estate Purchase

When preparing to buyreal estate, it is extremely important to ask as many questions as possible about the areas that interest you. Find out not only the year the building was constructed but also the condition of the entire property. Determine whether repairs are needed, and if so, what the scope of the proposed work is. Be sure to take the time for a detailed inspection of the premises to identify any potential shortcomings or issues that are not mentioned in the description. For added confidence, you can use the services of a professional inspector who will conduct a thorough check of the property's condition.

Exploring the area

Studying the area where the property is located is equally important.

Conclusion

In conclusion, the process of acquiring real estate in Sri Lanka for foreigners requires careful study and understanding of local laws and tax implications. As I found out during my research, there are several available options, each with its own nuances. For example,buying an apartment in a condominiumon the fourth floor and above may become an optimal solution for individuals looking to avoid significant property tax. At the same time,long-term lease for 99 yearsprovides the opportunity to use real estate without incurring high taxes, effectively turning the tenant into an owner.

Options for purchasing real estate

It is also important to consider options throughlegal entityIt provides additional opportunities for foreigners but requires a local partner. Despite the current economic challenges and crises, the real estate market in Sri Lanka offers interesting investment opportunities, especially in the context of the devaluation of the rupee for those who keep their assets in more stable currencies. This moment opens the door to profitable acquisitions.

Opportunities for investors

Such a diverse market, release“golden visas”Support measures for the local economy can attract the attention of foreign investors, allowing them not only to expand their assets but also to become part of a dynamically developing region. It is important to focus on current trends, study the offerings, and keep in mind the legal aspects when making investment decisions.

Final thoughts

I hope that my article will be helpful for those considering buying property in Sri Lanka. When exploring new horizons, it's important to approach each step thoughtfully and prepared.