Sri Lanka proposed lease tax, foreigner curbs, may hurt property market: developer

May 29, 2013 (LBO) – A proposed tax on leases and restrictions on sale to foreigners may hurt the market, a property development firm has said. “The proposed amendment to the law introducing a prohibition of sale of lands in Sri Lanka to foreign nationals and on imposing a tax on lease value will have a negative impact on our rental business,” Equity One Plc, a Colombo listed property firm said in an annual review.

“The proposed tax on lease values will discourage long term lease agreements with foreign tenants and will have an impact on the Company with regard to its ability to demand higher rentals, especially in the context where substantial informal markets exist in converting houses into office premises via informal rent agreements.

“With the proposed tax, it could be expected that the total tax on lease rentals for foreign nationals will increase to approximately 30 percent or more (inclusive of Value Added Tax (VAT), Nation Building Tax (NBT) and Stamp Duty).”

Equity Two said property prices have been stable in Colombo but is starting to pick up. Stable property prices lack of bubbles however also point to low inflation and