For Indian buyers looking at property in Sri Lanka
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An exciting new prospect for Indian property investors
Real Estate in Sri Lanka, in particular on its now-famed Southern coastline, offers a compelling investment opportunity for Indian buyers.
Relatively easy access, good value, capital appreciation and income potential make for an attractive blend.
Here we look at opportunities and considerations specific to Indian buyers.
If you’d like to schedule a call to talk these through, we’re available any time.*
Best buys
From the conversations we have had with Indian buyers, the listings below seems to attract on price, location, and strong rental potential.
On buying property in Sri Lanka as an Indian investor
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With a few exceptions (see below*), an Indian buyer, like any non-Sri Lankan buyer, cannot own property directly in their own name.
What is permissible is for them to have the controlling stake in a property holding company that is Sri Lankan registered.
Such a structure gives full, legitimate and secure control of the property. -
Access to property investment is not a new thing for non-Sri Lankans and there are multiple very credible and established law firms and company secretarial businesses that provide efficient, reliable support.
These companies will assist you in company setup/registration and smoothly manage the issue of shares to you and the local nominee.
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Typically, you will hold 49% of the property holding company with a local trustee holding the remaining 51%.
That local trustee should not simply be an acquaintance or trusted individual contact. As above, multiple firms exist to offer this service in a professional and reliable way. We will happily introduce you to a number that can provide this service, as they do already for several hundred clients.
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An established law firm or corporate services firm will advise you on the shareholding structure that gives you full and secure ‘control’ of the company.
Preferential share structures or pre-signed share cancellation agreements can give you that control and the option to terminate any setup should you wish.
Leaseback - a further option is to have the holding company lease the property back to you (individually) for 99 years. Though it comes with some cost (2% stamp duty most notably), this gives you full and private ownership of the property for that (long) period. -
An Indian buyer can acquire directly (i.e. own in their own name) a property that is part of a condominium, typically a multi-level apartment unit. (Some websites may refer to ownership allowed only at or above the fourth floor. This is no longer the case, any condominium unit is eligible for this exemption.)
Some new ground-level villa developments are seeking condominium status also and so it’s worth asking on this ownership option.
On owning and managing property in Sri Lanka as an Indian buyer
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Most Indian buyers we speak to are not looking to relocate to Sri Lanka. Rather, they want a holiday home in a gorgeous location that they can rent out for income when not using it themselves.
As the hospitality scene has rapidly evolved in Sri Lanka there are now multiple reliable villa management companies that can provide peace of mind, handling everything from guest arrivals and correspondence to property maintenance and local admin.
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Sure. Which company is the best fit will depend on the property. Once we’ve spoken we can introduce.
For now, here’s a link to our sister company, New House Hospitality, which may be a fit.
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Occupancy, and income from it, will in large part be a function of where you buy. We can advise on where best to look for income relative to, say, capital appreciation.
As a general rule, though, you might expect a villa bought for USD 500,000 to rent for $300-$500 per night throughout the year (let’s say average $400 a night). A reasonable expectation on occupancy would be 60% if well managed and in a good location. Assume costs (staff, maintenance, management company) of $2,000 a month and that’s net income before tax of $64,000.
So an annual return in the region of 10%. -
In the last 3-4 years, the small Southern towns of Ahangama and Kabalana have seen a real surge in tourism numbers as creative hospitality operators have recognised the attraction of the beautiful surf breaks on this stretch.
We’re seeing Indian visitors now flocking to this area so for an Indian buyer wanting to cater to that market, investing here makes good sense.
Land and property prices slightly further down the coast in, say, Midigama provide better capital appreciation potential but occupancies might be a little lower in the short term.
Full/direct freehold property options for Indian buyers
As above, there are straight-forward routes, via a holding company, for Indian buyers to safely enjoy the benefits of property ownership in Sri Lanka.
The options shown here, though, have condominium status and would therefore be available for an Indian buyer to acquire with full freehold ownership in their own name.
