Iconic eyes land acquisition in Sri Lankan buyer’s market
ECONOMYNEXT – Iconic Developments (Pvt) Ltd, a Sri Lanka-based unit of India’s Apurva Natvar Parikh Group, is looking for land deals in a market where prices are starting to dip, a top official said.
"We have not been procuring land over the past 12 months because our expectation is land prices will start coming down and they’ve started coming down," Iconic Developments Managing Director Rohan Parikh said.
"Land prices were quite inflated. Since mid to end 2018, there’s been a correction. It’s heading into a buyer’s market. People are negotiating price and land owners are starting to realise it."
Parikh was speaking at the completion of construction of the first phase of its latest apartment project Iconic Galaxy.
He said land prices had risen even more sharply than usual in recent years as developers acquired land for luxury apartments, mainly aimed at expected foreign migrants.
However, the political crisis hit the luxury segment the worst, he said.
"A fundamental principle is you have to build for local needs. The high-end is being built under the dream that people from abroad are coming," he said.
"If you’re building assuming that investors from x, y, z are coming, it’s a different market and obviously the instability didn’t help them much."
Iconic Developments however is supplying mid-range apartments for locals, and demand has picked up in that segment since January for its latest project Iconic Galaxy, Parikh said.
"In fact, March is going to be one of our best months ever."
Parikh said Iconic Developments is looking to build more mid-range housing, in smaller scale than its two existing projects, as residents prefer faster turnaround.
The firm is looking to buy land, but may hold off for a few more months, he said.
"Land unfortunately is a sticky asset."
"Land prices go up, and people get a dream in their head that they will get a certain price, and that takes a little while to correct."
"Normally, land prices correct through inflation."
"Prices remain flat and the value drops."
Five real estate developers have so far said that they have witnessed land and apartment prices stabilize, and in some cases, fall.
Many luxury apartments are priced in dollars, and the rupee collapse in 2018 had priced out many would-be local buyers.
Developers say that most Sri Lankans had bought luxury apartments as investments, to off-load to expatriates later for a capital gain or to rent out for income.
Many had been banking on the development of the port city and the Colombo International Financial Centre to attract more expatriate residents.
However, an economic slowdown and a political crisis had undermined the market.
"What happens in this situation is that people who have a brand and reputation for delivery will survive," Parikh said.
Inexperienced developers are likely to suffer, he said.
He said real estate will likely remain a buyer’s market until there’s more certainty in the economy and urban infrastructure develops further.
Sri Lanka is heading into an election year.
However, infrastructure for better public transport and community spaces are now being developed under the Megapolis Project. (Colombo/Mar22/2019-SB)
Jehan Perera - Executive Director National Peace Council