![](\"http:\/\/i2.wp.com\/www.siamlandbank.com\/propertynews\/wp-content\/uploads\/2016\/02\/Temple-in-Colombo-Sri-Lanka.jpg?fit=740%2C493\")
\nColombo\u00a0has strong economic growth, improving infrastructure and an increase in tourist arrivals
\nTemple in Colombo, Sri Lanka
\nPost-war Sri Lanka has created the perfect storm for intrepid property investors with its capital city, Colombo, seen as having the potential to be South Asia\u2019s hub for real estate investment, according to recent reports by JLL and global property portal Lamudi. Still, the threat of market overcrowding looms, and the country\u2019s unpredictable political narrative could also spell trouble.
\n\u201cSri Lanka is among the top emerging economies in the world,\u201d says Shiluka Goonewardene, real estate advisory partner at KPMG. \u201cThe market for real estate has shown a phenomenal growth since 2009 and shows clear signs as an upcoming real estate investment destination.\u201d
\nHe adds that \u201cample investment opportunities\u201d have been made available following the country\u2019s dramatic transformation, mainly driven by infrastructure developments and stable economic growth. Recent improvements seen in the tourism, information technology, business process outsourcing, banking, finance and insurance sectors also have a hand in the current healthy demand for real estate.
\nMore: What Sri Lanka\u2019s election result means for Colombo Port City\u2019s future?
\nIn a real estate agent survey undertaken by Lamudi last year, it was revealed that 65 percent of the respondents reported feeling positive about the sector\u2019s growth prospects in 2015, while over half forecasted growth of more than 8 percent in the property market.
\nMost of the agents surveyed also acknowledged that infrastructure improvements \u2013 including the creation of the Outer Circle Highway, proposals for a metro rail and monorail, and planned expansions of the city\u2019s port and Bandaranaike International Airport \u2013 were the primary reason behind Colombo\u2019s increasing investment appeal, thanks in large part to smart investments from the government after the civil war ended in 2009.
\nWith political troubles now seemingly in the past, international visitor numbers have steadily increased in recent years. The obvious appeal of Sri Lanka\u2019s beautiful beaches and Colombo\u2019s emergence as a retail and casino destination has also boosted overseas interest, which has been cemented by the presence of multiple luxury international hoteliers and esteemed brands, including Shangri-La, Marriott and Hyatt. Although the majority of visitors are from neighbouring India, European, Maldivian and Arab tourists have also had their interests piqued.
\nBeach in a center of Colombo. Sri Lanka
\nHowever, as an emerging economy \u2013 it surpassed 7 percent in 2013, the strongest in South Asia \u00ad\u2013, there are still some significantly limiting factors on the Sri Lankan property market. The legacy of 26 years of civil war has left its mark on the country; the government is still the subject of a war crimes investigation and little attempt has been made to reconcile with the Tamil opposition. Lamudi\u2019s survey results state that political changes, as well as restrictions on foreign investment, are two of the most notable threats for a rosy future.
\nLimitations on foreign investment are also counterintuitive to the government\u2019s ambitious target setting for Foreign Direct Investment; it would like to hit USD2.5 billion this year.
\nRelated: The ultimate second-city investment guide
\nBut the pull of Colombo is apparently enough to overcome these factors for now; high-net-worth foreign buyers, in addition to wealthy Sri Lankan immigrants keen to return now war is over, are increasingly making their real estate presence felt in the city.
\n\u201cThe Sri Lankan market has been a target for the regional countries such as India and China for quite some time, but the civil conflict had been a barrier to entry till 2009,\u201d notes Hugh can der Kolff, country manager of Lamudi Sri Lanka. \u201cCurrently, Sri Lanka is experiencing increased interest from foreign investors, especially in the real estate sector.\u201d
\nFort, Colombo\u2019s CBD
\nThe rising cost of apartment living in Colombo has forced the locals out to the suburbs in order to make way for these affluent investors. The luxury residential market in central Colombo commands average prices in the region of LKR40,000 (USD300) per square foot. Although this seems reasonable in comparison to its international capital counterparts, JLL have ascertained through an affordability survey that two- or three-bedroom properties are now out of reach for 90 percent of the population.
\nDue to the restrictions on foreign ownership \u2013 Sri Lankan laws prohibit non-citizens to own land and can only buy condominium units on the fourth level and above \u2013 luxury condominium projects are inevitably developers\u2019 first choice when it comes to wooing overseas buyers. And woo them they do; most condominium developments sport high occupancy levels, according to a 2012 KPMG report. Their appeal is clear: a 3-7 percent rental yield is common across in the board and capital values across the Central Business District have appreciated by more than 40 percent in the last three years, according to JLL.
\nNot only are the potential returns attractive but developers are also creating increasingly luxurious and aspirational developments in a bid to cater to the elite. The most notable of these is the two-tower Altair, comprising some 400 luxury apartments, 40,000 square feet of retail space, and standout sustainable features. Developed by Indocean Developers (Private) Limited and designed by renowned architect Moshe Safdie, the 240-metre high skyscraper is due for completion in 2017.
\nWorld Trade Center and Bank of Ceylon in Colombo, Sri Lanka. Colombo is the largest city and commercial, industrial and cultural capital of Sri Lanka
\n\u201cAltair will set new standards for Colombo, and perhaps even for the region as a whole,\u201d said Safdie, the design guru behind Singapore\u2019s Marina Bay Sands. Offering concierge service provided by Quintessentially, Altair\u2019s unique luxury is certain to prove alluring to the affluent clientele the project is hoping to attract.
\nWhile it\u2019s clear that Colombo\u2019s star is shining bright on the investor landscape, audacious investors should take note of the impending danger of oversaturation in the property market.
\nIndeed, 64 percent of real estate agents thought the biggest constraint on the market was the vast and growing supply of new developments, according to the Lamudi report.
\nKPMG\u2019s Goonewardene, however, advises overzealous property developers to promote the \u201cimportance of proper pricing, positioning and branding on newer property developments.\u201d
\nColombo: Property Picks<\/p>\n