The building was initiated by Sri Lanka's Ceylinco group which ran into difficulties from late 2008. The building was among several expropriated by the state through a controversial law last year.
The economic development ministry said Sri Lanka's Urban Development Authority has given a 99-year lease of the land to the firm and it will also get tax breaks under a strategic investment law.
The building will have a 565 room 5-star hotel spread through 94,000 square metres.
"The hotel complex is expected to be managed by Hyatt International under the Hyatt Regency brand and the terms of engagement are being currently concluded," the statement said.
Guests arriving at the hotel will be taken to a lobby on level 13 through high speed lifts. A 2-storey high 750 square meter 'pillar-less' ballroom will be built on level 04.It could house 600 people seated, or 1,000 standing.
The hotel will have 54 suites, 265 'King' rooms, 150 twin rooms, and 6 rooms for the disabled.
Levels 31-41 will have 90 residential suites for long stay guests also managed by Hyatt International.
Construction was started on July 19 with at a ceremony attended by economic development minister Basil Rajapaksa, urban development ministry secretary Gotabhaya Rajapaksa and secretary finance P B Jayasundera, the statement said.