Sri Lanka’s real estate and construction sectors are showing signs of recovery, but challenges persist due to inconsistent policies and high taxation, according to industry stakeholders. Sivarajah Thumilan, Founder and Chairman of Blue Ocean Group of Companies, highlighted that these issues are undermining the sector’s global competitiveness despite its significant potential for foreign exchange earnings.
Speaking at the Group’s 13th anniversary event, Thumilan criticized the high taxation burdens—ranging from land purchase levies to social security, VAT, and customer stamp duties—as major factors driving up property prices. He attributed the sector’s struggles to these fiscal policies and a lack of consistency in policy implementation.
Thumilan also warned that forthcoming property taxes, including the imputed rental income tax effective from April 1, 2025, are likely to exacerbate price increases and deter foreign investment. He argued that with a more favorable operational environment, the real estate sector could attract more foreign inflows than tourism.
Kesely Developments Non-Executive Director Adrian Perera echoed Thumilan’s concerns, noting that excessive regulations and bureaucratic hurdles are discouraging foreign investment. He pointed out that even high-profile projects like Colombo Port City face similar obstacles, making the investment process more cumbersome compared to other markets like Australia.
“The regulatory environment in Sri Lanka creates more barriers for investors. It’s easier and faster to invest elsewhere, which is a significant disadvantage for our market,” Perera said.