Steady real-estate market moves with changes

Roshan Madawela – The Research Intelligence Unit (www.riunit.com)


MARKET COMMENTARY

An observable feature of the real estate market in April has been an increase in demand for office space and premises within Colombo. However, the demand is largely unmet due to the shortage in suitable facilities that meet the specific needs of various businesses and other clients. The largest single drawback in this regard is the lack of parking space to be found in the central areas according to analysts at Bartleet Real Estate Brokers.

Due to the evolving socio-economic fabric of society, almost all senior executives currently drive a vehicle into work. As a result, even the small business entities demand between ten and 15 parking spaces. In most cases, facilities that accommodate adequate parking are impossible to find in and around Colombo. It is unfortunate that local property developers have mostly failed to deliver adequate parking space by incorporating such facilities into the buildings.

Behind the rise in demand for office space are a plethora of players that include foreign missions, INGO’s and multilateral agencies in addition to businesses of various size and stature. The former who used to rent houses and modify them accordingly now seem to prefer proper office space, preferably open-plan premises that allow flexibility to partition as needed. Unable to reconcile the specific needs of clients, real estate agents are urging renters to look outside the central areas in order to meet their office facility requirements.

However, despite the desire to rent central locations, certain central spots that are considered to be high risk in the context of the prevailing security situation are not wooing any takers. Consequently, many of the high quality buildings in the heart of the city with an abundance of parking are currently vacant with little or no interest from renters.

The uncertain security situation has also impacted on the market for leisure and recreation properties. Foreign interest in particular has recoiled from land and housing development projects in the wake of recent security related developments. However, any progress in the peace-front would render these concerns to a short-term blip as analysts assert that the pent-up demand from foreigners and locals living overseas is and will remain very strong.

DEAL PROGRESS SLOWS IN APRIL

As an acceptation, the month of April with its festivities has served to slow down the finalization of deals from the legal and financial perspectives. Adverse weather conditions have also tended to further slow-down activity and some would hope that perhaps town-planners will start to think seriously about the threat posed from flooding as a result of poor drainage and unprecedented land filling in Colombo.

April witnessed the ASPI gain by 31.84 points whilst the MPI increased by 21.48 points. The land and property sector started well, gaining about nine points before fading out towards the end of the month. Overall, the market was described as dull and lacking in activity according to BMR Research.





POSITVE OUTLOOK REMAINS

The overall real estate sector is continuing in an un-faced manner, gaining in prices across the board with the exception of some exclusive areas that show signs of having reached their peak. Building restrictions imposed by the authorities also tend to check price rises in the traditionally exclusive areas whilst the sub-urban areas continue to attract more-and-more interest. Consequently, these new development spots continue to woo first time buyers whose average age of property ownership has been falling over recent years due to socio-economic factors. Today, more and more young buyers and couples enter the property market than in the past. The phenomenon is serving to exert upward pressure on land and property prices. According to one international real estate analyst, Sri Lanka’s real estate sector will continue to expand by between 24 and 25 per cent per annum.

The domestic tourism sector is growing at a very healthy rate and the signs are that it will continue to gather momentum. Today, many more holiday makers desire to venture out into interior vacation spots as well as the more traditional beach resorts. Importantly, those who can afford such excursions continue to increase in number. Moreover, the local demand for high quality hotel facilities that accommodate weddings, workshops and various social functions is showing signs of sound growth and is helping to ensure the survival of the sector amidst falling foreign tourist arrivals.

With much of the local middle-class as yet unable to afford foreign holidays that are largely outside their budget, analysts conclude that the potential for the leisure sector in Sri Lanka is excellent as the local demand expansion is likely to be matched by some level of sustained foreign interest. The latter would pick-up very quickly in the event of progress on the peace front.

In an attempt to bring clarity and a more scientific approach to this sector, the Research Intelligence Unit is currently working with the Bartleet Real Estate Brokering division to monitor the real estate market. For more information visit www.bartleettranscaptial .com

Copyrights Reserved (RIU 2007). Prepared exclusively for the Business Standard.


NEWS IN BRIEF
‘Colombo up to standard’
According to the Director of Keangnam Lanka, Sri Lanka’s condominiums and apartments are up to the same standards are those found in London, New York and Sydney. He is also reported to have said that the land prices in Colombo are on par with many European countries and the city’s living standards are above those of other Asian countries. The Korean based company that is currently engaged in building the island’s tallest apartment complex, the Dawson Grand, said that demand for these apartments came from expatriates as well as local buyers. The Dawson Grand project has an investment of $60 million and is set to be completed in 2009. Since inception in 1951 the Koran giant has constructed buildings, housing complexes, roads and a variety of other infrastructure projects in Thailand, Philippines, Vietnam, Singapore, Saudi Arabia, Bahrain, the UAE, Ethiopia, Malaysia, Eritrea, Brunei, the Cameroon’s and of course Sri Lanka.
Realizing a real estate stock-market
The C.E.O of REBI International is reported to have said that Sri Lanka will soon have a ‘real estate stock-market’ backed by a national pricing index (NCI). The company that has already developed a NPI formula for India is said to be working on a NPI for the country with the backing of the government who own some 80 per cent of the island’s land. Standardization is the key to a system that will transform real estate into a commodity that is tradable according to Sri Lanka REBI experts. They also estimated property prices to be growing at between 24 to 25 per cent per annum.
Unregistered developers face legal action

The Condominium Management Authority (CMA) has said it will take legal action against developers who have not registered their properties with the Registrar General’s Department. Despite being a statutory requirement to register, many developers have failed to do so and in many cases have sold condominium units to individual owners without even issuing the deeds. According to the Apartment Ownership Act and the Apartment Ownership (Amendment) Act of 2003 ‘the unit owners who had not obtained their deeds after the sale can complain to the Condominium Management Authority’. It is also required that the Condominium Properties should be registered within 18 months of the sale and within three months of the construction. Violators can expect to be produced before the Magistrate and if guilty fined Rs50, 000 and Rs1, 000 for each day following conviction.

Road-map to development

It was announced that the Japanese government is to extend to 30-year loan facility worth Rs.19.7 billion (21.917 billion yen) to construct a highway linking the Colombo-Matara to Colombo-Katunayake expressway. With the development of the four-lane highway, the townships of Makumbura, Kadawatha and Kaduwela will also undergo development as those displaced by the road construction are relocated.

Ceylinco bags award

Ceylinco Homes International was recently awarded the Super brand status as a function held in Colombo. The award was in recognition of the organizations pioneering efforts in real estate development that has sought to conform to international standards. Since its inception in 1993, a number of projects like Lotus Grove, The Villa and Eden Gardens as well as more recently completed condominiums in Colombo city have distinguished Ceylinco Homes as a supplier of dwellings to the upper-end of the market.
Leisure potential
Un-faced by a down-turn in the leisure industry, the Ceylon tea specialist Merril J Fernando (MJF) has announced plans to expand its tourist resort portfolio across the island. The group is said to be in the process of acquiring land in the cultural triangle, along the coast and in the tea growing areas with a view to building more resorts. The MJF group is known for its Dilmah teas that are exported to some 90 countries.
Model city for tsunami victims
The tsunami affected people of Akkarapaththu can expect some comfort in the form of a fully equipped model city in the name of King Abdullah funded by the Saudi Arabian government. The model city is to be built over 60 acres of government owned land with 500 houses, two mosques, 30 feet inner road, a hospital, a school, a welfare center and 30 shops.
Kelsey Homes launches new project
One of the countries leading home builders has launched a new luxury housing project – Shamrock – in Welikadawatte, Ragigiriaya. The projects comprises of four exclusively built homes, each priced at Rs30 million and upwards. With luxury fittings and a Jacuzzi in the master bedroom, the homes come with a ten-year structural warranty and one-year free maintenance.
Development for Puttlam
The Cabinet has approved a $34.2 million project that will build infrastructure and housing in the Puttlam district. Funded by an interest free facility from the International Development Association of the World Bank, the loan carrying a service charge of 0.75 per cent is repayable over 20 years. An additional $2.2 million is to be contributed by the government. The proposed project will include houses, water facilities, roads and sanitary facilities for some 20,600 families that include both IDP’s (internally displaced persons) and non-IDP’s.
UDA re-shuffles portfolio
According to sources, the Urban Development Authority (UDA) is in the process of disposing various shares in order to concentrate more on urban development activities. The funds are to be used for a large-scale administrative complex in Sethsiripaya, Battaramulla. Much of the UDA lands are currently not in a position to be utilized due to unauthorized occupation and incumbents.

Source: The Research Intelligence Unit.