Five years ago, Sri Lanka’s government imposed stricter rules on visa requirements. This happened as part of an on-going process to improve administrative procedures following the end of the war in 2009. Since the new visa laws were proposed, a new government has come into power. What impact do the new visa requirements and this new government’s enforcement of the rules have on real estate investment on the island? Leading property portal Lamudi finds out,
Visa Programmes in Sri Lanka’s New System
Since the end of the war, Sri Lanka’s immigration services have evolved considerably. The process of applying for a visa and having a visa approved is now more similar to processes in fully developed countries like Australia. All visitors to Sri Lanka now require an electronic travel authorisation document (ETA) to enter the country. This represents a similar procedure to the USA and Canada’s immigration services. When it comes to spending longer periods of time in the country, (and depending on your citizenship) you can either apply for a Visitor Visa (for a short stay), or a Residence Visa. There are various different types of Residence Visa. You can get a visa for being an employee, an investor, a member of the clergy, a diplomat, a student, a family member, a returning former-expat/dependent, an Indian person covered by the 1954 Indo-Lanka Agreement, or someone applying to the “My Dream Home Visa Programme” (a program for retirees). The My Dream Home Visa Programme serves to allow “senior foreign nationals” to purchase property in Sri Lanka as long as they meet certain requirements. Foreign nationals over the age of 55 can apply for this scheme as long as they “remit US$15,000 or the equivalent in an approved foreign currency”. They then have to deposit the funds into a Sri Lankan bank account. Other requirements also apply.
Increase in Real Estate FDI in Sri Lanka
These days, having a valid permanent residency visa is usually a requirement for purchasing property in Sri Lanka. However, factors other than immigration status can affect the process of acquiring a home on the island. In fact, the rules of property acquisition by foreign nationals have changed for the better in recent years. Since President Maithripala Sirisena was elected in 2015, Sri Lanka has relaxed laws restricting foreign investment. This move has encouraged foreign investors to purchase homes in Sri Lanka.
Before the relaxation law was passed, foreigners who wanted to invest in property on the island (those buying leasehold) had to pay a large and off-putting sum in tax. Since the law was passed, foreign nationals wishing to buy land can now initially be 49% shareholders of leasehold. Foreigners used only to be allowed to own 25% of this land. Foreigners now have the opportunity to apply for a freehold arrangement 20 years after buying this share. This is a big step as in many emerging markets, it is not possible to apply for freehold as a foreigner at all. Foreign investors can now purchase a home with leasehold of up to 99 years with a minimal tax fee. In addition, the process for signing a deal on property is now much more streamlined for foreigners. It still isn’t possible for foreigners to buy freehold properties and land from the outset, so there is still a fair way to go, but the situation is definitely getting better. This implies good things and a bright future for Sri Lanka’s property market.
A demand for luxury property among foreign nationals in Colombo
City centre property is in high demand in the nation’s capital. According to JLL, Colombo records high sales velocity in projects close to completion; out of 3,300 luxury apartments supplied since 2005, 98% of the completed units were reported sold in 2014. While this trend does not appear to be increasing by very much, demand remains stable and the economy is stable too. In addition to foreign investment providing a boost to Sri Lanka’s real estate economy-wise, FDI has also had an impact in the type of property that is the most in demand. Luxury property in Sri Lanka’s capital, Colombo, is on the rise. This trend is largely motivated by foreign nationals’ penchant for luxury apartment living, especially among the retired, including those on the My Dream Home Visa. Demand is expected to grow.