"It will take 30 to 35 million US dollars to re-do this property," executive director finance of Taj Resorts and Hotels, Anil Goel said.
The group is now evaluating the property to decide where to place it on the group's new portfolio of brands, he said.
Listed Taj Samudra is majority controlled by the Taj group.
Taj also owns a 50 percent stake in Taj Exotica, a 160 room resort in Sri Lanka's South West coast, which has been re-branded as 'Taj Vivanta Bentota' from this week.
It also manages a 130-room hotel near Sri Lanka's only international airport. The Taj Airport Garden hotel, owned by Sri Lanka's Hirdramani group will be put under 'The Gateway Hotel' brand from January 2011.
Its owners are upgrading 40 rooms and building 100 new rooms to increase capacity.
Taj is now evaluating the Colombo property to decide which brand to place it under.
Chief executive Raymond Bickson said the group has been scouting opportunities in the war-torn eastern province of Sri Lanka which has long undeveloped stretches of beach.
Goel said all three properties in Sri Lanka have seen a "dramatic turnaround" in the past few months which had made the group more confident about investing in Sri Lanka.
He said room rates have moved up from around 60 US dollars a day to near 100 dollars and is trending up, unlike during the war years. Occupancy was up.
"Unfortunately we could not command the rates (during the war years)," Goel said.
"There is no correlation between investment vis-a-vis the return from the market."India itself sends more tourists to Sri Lanka than any other country. Up to August 2010, arrivals were up 46 percent to 397,000. Indian visitors were up 63 percent to 73,400.