An island of opportunity
Sri Lanka's exotic culture and natural beauty are a hit with tourists
Don't mention the war, Basil Fawlty warned. In the context of Sri Lanka, it was hard not to during 26 years of devastating internal conflict.
But in 2009, the dialogue changed. The civil war ended and people no longer associated Sri Lanka with trouble and strife, noticing instead its exotic culture, natural beauty and untapped potential. In this now-peaceful island nation, they saw a land of opportunity.
Tourists began arriving in droves, with arrivals up 46 per cent year-on-year in 2010, and 30 per cent last year, according to government figures. In the six months to June 2012, a 21 per cent increase was recorded, and more than 1 million visitors are expected by year's end.
The Asian Development Bank attributes the benefits of peace to economic growth of 8.3 per cent last year. Noting that foreign direct investment (FDI) inflows of US$1 billion far exceeded the government target last year, the bank forecasts 7 per cent growth this year and beyond. "Overall, Sri Lanka scores a good performance rating," its report says.
The positive flow-on to property markets is highlighted in a report by KPMG and the Research Intelligence Unit. It reveals a "significant growth phenomenon" for Sri Lankan real estate since 2009, with a marked increase in price levels across all property sectors, including land, residential housing, commercial premises and condominium-style apartments.
Increased foreign investment in prime blocks of commercial lands in the city of Colombo, the acquisition and resale of leisure properties by private investors, and a general increase in confidence levels of household investors were cited as drivers in the January 2012 report. The report also found a lifestyle shift in Sri Lanka, as buyers have a growing acceptance of apartment-style living, and cities become more accessible and better-equipped with infrastructure. A growing leisure sector is also contributing to a need for quality accommodation. According to the report, further transformation is likely to take place in Colombo as it moves towards becoming "a picturesque and yet commercial city which could emerge as a trade hub for South Asia".
Reyaz Mihular, managing partner, KPMG Sri Lanka, notes a number of emerging opportunities for institutional and individual investors.