A state procurement committee has decided that the land be allocated after one-to-one negotiations with the Treasury. Successful firms will have to pay up front.
The market price for private land in the area is now about six million rupees, he said.
The sale of 500 acres would bring the government about 10 billion rupees at the rate of 20 million rupees an acre.
The same model is likely to be followed in giving land to developers who have expressed interest in putting up resort and leisure services in several islets in the Kalpitiya area, Godahewa said.
Authorities had received 11 proposals to build hotels and develop services in the islets.
Sri Lanka's The Sunday Times newspaper quoting un-named industry sources said Senok Group, Evergreen Hotels, Jetwing Group, Mackwoods Travels, Pathfinder, Sapphire Bay Resorts, Abans, Sun Marina, Ambika Windmills, Upali Travels, Makara and Integrated Resorts, all local firms, have given proposals.
There had been no foreign bidders. The report said some local firms may not be able to find the money if a single up-front payment is needed for a lease.
Treasury secretary P B Jayasundera had said earlier that the government was hoping to raise 500 million US dollars from land sales to hotel developers this year.Hong Kong based Shangri-La and CATIC, a Chinese state firm is paying 125 million dollars each for two blocks on beachfront land in Sri Lanka's capital Colombo.