Due to escalating costs SL’s real estate business seen as unviable

By Hiran H.Senewiratne

The Sri Lankan real estate business at this juncture is not viable due to the new tax system and high inflation. These factors have compelled these businesses to shift into other sectors, such as the hotel and leisure industry, chairperson, Natwal Parikh Group Rohan Parikh said.

” Due to the rupee depreciation, the cost of construction is very high. Consequently, import duty has become unaffordable. On top of that the 15 per cent Value Added Tax for the end price added a high cost to the price, which is one of the major factors for housing prices to escalate , Parikh told The Island Financial Review.

Parikh added: “We have no plans to go ahead with our businesses right now. One apartment has already been completed, which is known as ICONIC, situated at Rajagiriya along the Parliament road. Another was nearing completion, known as ICONIC Galaxy Skye at Buthgamuwa, Rajagiriya.

“At present we have two prime properties at Rajagiriya and have no plans to go ahead with the apartment business. The cost of mortgage is very high for the customer to purchase apartment units due to high interest rates and 15 per cent VAT on the end price.

“With the escalation of the cost of production, high inflation and unpredictable future inflationary pressure, we cannot reconcile our business with our theme ‘Affordable Luxury’. We are compelled to look at other avenues and business opportunities in Sri Lanka. We would preferably be in the hotel and leisure sector, where they have plans to purchase hotel properties which are right now non-operational or defunct.

“The cost of construction of one square foot is very high in Sri Lanka due to the considerable import duty. Imported items, such as tiles, fittings and other materials cost a lot.

“Owing to these factors, affordability of housing has become difficult. The current economic crisis will continue for some time. This really hinders the growth of the economy. Because housing wealth is a very important component for economic development. Further, BOI is also not considering any tax incentives for foreign investment.

“Amid all these odds and tribulations in the country, Colombo has been really impacted by the wiping out of the bottom half of the real estate market.”

Natwal Parikh set up in 1947 in Mumbai, is into construction of school educational assets, hospitals and other businesses confined to Mumbai and Pune areas and is also into the logistics trading and investment business in Singapore. The Sri Lanka entity/partner is known as ICONIC Development (Pvt) Limited.