A Guide To Investing In Property In Sri Lanka For Foreigners And Expats

From a simple house to an industrial warehouse, buying, selling or leasing property can be a complicated and challenging process for both commercial property seekers and individual property buyers.

With an ever-expanding economy, the gross domestic product per capita in Sri Lanka has risen to more than 9,425 US dollars, resulting in an energetic middle class with greater purchasing power. To make the buying process clearer, Lanka Property Web, with the assistance of data from the Doing Business Project of the World Bank, has created a useful guide for property seekers in the country.

In general, the buying and selling process for real estate on the island is considered not very complex, unless the key buyer is not a citizen of Sri Lanka. These procedures are governed (in most instances) by the common law of Sri Lanka, which is referred as the Roman Dutch Law. Exceptions for this may include citizens that might be under the influence of the Kandyan Law, the Thesawalamai Law and the Muslim Law.

This article will focus on the procedures, regulations and key terminologies used in the Sri Lankan property trade. To begin with, the land is measured in perches unlike other nations where square feet, square metres and cents are used. One perch is equivalent to 272.25 square feet. However, it is crucial to note that the entire land inclusive of the building is measured in perches while the building alone is measured in square feet. For example: A 2,300 square-foot house is built on a 40 perch land.

In terms of regulations, the government of Sri Lanka has implemented a law restricting foreigners from purchasing property in the country. However, they are allowed to purchase a condominium above the fourth floor or lease a land. Prior to the law, foreigners were allowed to purchase property by paying a humongous 100-percent tax. The law continues to state that a lease can be approved for a period of 99 years with a tax of 15 percent.

As it is in every other country, no transaction is considered valid if the contract is not prepared and signed before a lawyer. Nonetheless, the deed of the property should first be checked at the land registry in Town Hall for owner details, former transactions, legality and any unlawful disputes upon the property.

Subsequent to checking the validity of the deed, both parties may go forward in completing the transaction where upon signing the agreement in the presence of a lawyer, the change of ownership is considered valid. It is at this point the monetary transaction occurs as well, with the use of cash since most locals do not accept electronic means. That said, commercial properties or luxury property owners rather prefer a cheque or wire transfer.

Once the transaction is made, the lawyer registers the lease with the land registry and the new lessee is welcomed to make use of the property.