Sri Lanka next Bali-New York Times

GALLE SRI LANKA

These days, Sri Lanka is often called the next Bali.

Tourism has more than doubled since the 26-year civil war on this teardrop-shaped island in the Indian Ocean ended in 2009, with 1.27 million visitors arriving last year. And some of those foreigners have been buying vacation homes, especially along the island’s southern coast, even though changes to property laws in 2013 made such purchases more complicated and costly.

For many, the decision to buy was not a snap judgment.

Matthew Harragin, a retired stockbroker from Britain, and his wife, Sue, an artist, first visited the country 15 years ago on vacation.

“Sri Lanka got totally into our blood,” Mr. Harragin said by telephone during the couple’s recent trip to Europe. “The people, everything about the place spoke to us, but at the time, of course, the war was still going so we had no conscious thoughts of ever living there.”

But they returned after the end of the war for another vacation, and then about three years ago bought land in a coconut grove in Midigama, not far from the southern district capital of Galle and only a short distance from a surfing beach.

They spent 18 months building a five-bedroom colonial-style house in wood with terra cotta tiles and polished cement floors. “It’s ended up an absolute palace — much larger than we expected,” Mr. Harragin said.

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He estimated that the house, swimming pool and the land cost a total of about 500,000 pounds, or $783,010.

(While the Harragins recalled the sums in pounds, high-end homes in Sri Lanka are listed in American dollars or Sri Lankan rupees and the final transactions are in rupees.)

Rapid improvements in infrastructure since the war’s end have made the country’s southern coast more accessible, and more appealing, to tourists and home buyers.

“It used to take five hours to drive from the airport to Galle,” said Kavita Devi Faiella, who moved to Sri Lanka from Australia in early 2013 to become executive assistant manager of the luxury Amangalla hotel at Galle Fort. (The fort, built in the 16th century, is a Unesco World Heritage site.)

The 100-mile trip now takes less than two hours. “Now with the freeways, I think that’s what probably makes the biggest difference in opening up the country and making it very accessible,” Ms. Faiella said.

It was only a couple of years ago that Michael and Willemina Mansell came to Sri Lanka on a vacation from Qatar, where Mr. Mansell is a petroleum engineer. They decided to buy a home, and paid $650,000 for a three-bedroom colonial-style house inside the fort walls.

“It was built in 2006, but of course everything in the fort needs to be done in the traditional style so it looks like it’s many centuries old,” said Mr. Mansell, who is British.

Mrs. Mansell, a Dutch artist, said a few of the house’s most attractive features were its spacious roof terrace and the sea breezes.

“Yes, we fell in love with the house — but we first had to fall in love with Sri Lanka,” she said.” “Sri Lanka has everything: jungles, wildlife, mountains.”

There are no official tallies of property prices in Sri Lanka, but Eduard Hempel, managing director of Pearl Properties, an agency based in Galle that caters primarily to foreigners, said there had been a fivefold increase in the value of prime beach properties between 2009 and 2012.

For example, he said, a house that would have sold for about $500,000 in 2009 in Talpe, one of the most desirable and expensive areas at the island’s southern end, could now be worth about $2.5 million.

And today, Mr. Hempel estimated, about 60 percent or 65 percent of the beachfront from Bentota to Hambantota — about 110 miles along the southern coast, including the Galle area — is owned by foreigners.

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Demand stalled in November 2012, when Sri Lanka announced there would be changes to its property laws the following year.

“The market went dead for nine months,” Mr. Hempel said. “We went from having four or five potential buyers visiting a day to three or four buyers a month.”

But once the new directives were released in June 2013, he said, the market began to recover. “It’s not as busy as it was at the end of the war, but it has been very good,” he said.

The new laws, which went into effect in October, limit foreigners to 99-year leaseholds, ending the outright purchases of land that had been permitted, and added a special stamp duty of 15 percent of the leasehold price.

Also, foreigners are limited to 49 percent of the shares in any local company set up to buy land; the majority must be held by a local partner.

“It is pricey, but I think that over the next three months the market will absorb it and then move on,” Mr. Hempel said.

“I believe the laws are still more favorable to buy property in Sri Lanka than Bali or Phuket, which would be the markets we like to compare ourselves to,” he added. “But we’re still far cheaper — five or 10 times cheaper.”

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