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Thursday February 29th, 2024

Sri Lanka property developers seek to re-start work, clarity on import controls

ECONOMYNEXT – Sri Lanka’s property developers have asked President Gotabaya Rajapaksa to start work which had been halted to stop Coronavirus and also sought clarity on import controls proposed as the central bank injected liquidity de-stabilizing the rupee.

The Condominium Developers Association of Sri Lanka (CDASL) asked President to allow the commencement of Construction Projects as soon as practically possible and include property firms among those eligible to get credit relief.

Sri Lanka’s politicians have said that all imports other than medicine and fuel would be banned and the public had been asked to grow kollu (horse gram) and other grains and vegetable as the central bank printed money and generated forex shortages.

“There is some ambiguity on imports of building materials and equipment since the authorities have made statements regarding imports being restricted to essential items only,” the CDASL said in a statement.

“A clarification on this would be helpful to avoid further disruption in project supply chains.”

The association also asked for relief from para tariffs on imported inputs and to ease cashflow pressures on developers and contractors.

The developers said allowing foreigners based in Sri Lanka to get apartments with their domestic earnings, without having to remit from overseas and allowing expats to get a part of their finance from domestic banks would also help.

Liberalizing resident visas would also help.

The full statement is reproduced below

April 17th, 2020
H.E. Gotabaya Rajapaksa
President of the Democratic Socialist Republic of Sri Lanka
Presidential Secretariat
Colombo 01

Re: Relief for the Property Development and Construction Industry

Your Excellency,

The Condominium Developers Association of Sri Lanka (CDASL) sincerely appreciates all efforts taken by you and your government to curb the spread of COVID-19 and ensure the welfare of our citizens. We are also aware of and appreciate all the measures the government has put in place in its effort to minimize impacts on the economy.

As you may be aware, the property development industry employs hundreds of thousands of people, both directly and indirectly, throughout Sri Lanka. This includes direct employees of development companies, a large number of professionals and technical personnel, as well as vast numbers of construction workers who are highly vulnerable to economic shocks.

The property development industry is the primary employer and revenue source for the majority of professional construction firms, as well as thousands of SMEs across the economy, from small scale building material providers, to manufacturers and installers of a range of finished goods and equipment.

A slowdown in development activity will have immediate impacts on these firms (and their employees) which will only get resolved when development projects are able to move forward. As such, we would like to propose the following measures to help our industry get back on its feet:

1. Permit and facilitate the commencement of Construction Projects as soon as practically possible.

All construction sites in Sri Lanka are suspended, and with them employment and income for many thousands of workers and SMEs. A resumption of work in construction could be done based on clear regulations and restrictions as advised by the government’s health authorities.

2. Include Property Developers among the list of industries/sectors eligible for financial concessions recently announced by the Central Bank to help with working capital/cashflow pressures.

With very large capital outlays for our projects, developers are among the first to go into financial distress with an economic downturn. The cascading effect of suspension of development projects will ripple through the economy at multiple levels as banks, personal investments of homebuyers, and hundreds of thousands of jobs will be at risk. Clear guidelines need to be issued to banks and the financial sector on preferential interest rates, loan moratoriums etc.

3. Direct the BOI to extend the Project period permitted under the BOI agreements for projects which are currently underway and impacted by the shutdown.

All construction sites have been shut down and global supply chains for materials and equipment are severely impacted. Given these circumstances, delays in construction projects are unavoidable, and ensuring BOI concessions are extended to accommodate such unavoidable delays would be critical to ensuring viability of many of these projects.

4. Permit the importation of Project related materials

There is some ambiguity on imports of building materials and equipment since the authorities have made statements regarding imports being restricted to essential items only. A clarification on this would be helpful to avoid further disruption in project supply chains.

5. PAL, CESS and other such levies to be waived on Project related material for a stipulated time period to stimulate the development activities and reduce cost structures.

Relief on para tariffs for project specific imports will reduce cashflow pressures on developers and contractors alike in the current revenue-constrained environment and help projects to keep moving.

6. To encourage new investments greater than a stipulated value by granting very attractive concessions.

Sri Lanka needs new investments to move forward and grow. With a global slowdown, attracting new FDI and launching new investments will be substantially harder. Highly concessional terms will be needed to ensure viability of projects that can be kicked off in the coming year or two. We trust the government will put in place aggressive concessions to stimulate investment in new projects as well.

7. To fast-track the implementation of REITs and related legislation/regulations.

The slowdown of the economy both locally and internationally will inevitably cause a drop in land and property valuations which in turn will substantially expose banks who often use land and property as collateral for lending. Creating an enabling legal/tax environment for the launch of REITs would help mobilize more equity capital/FDI and also stimulate more long-term investment in the real estate space, which in turn could help stabilize property prices.

8. Encourage foreign buying/investment in Sri Lankan real estate

Given the Government’s strategic approach to managing the COVID outbreak, Sri Lanka is emerging among the countries displaying effective crisis management capability and resilience. This is a huge positive and could encourage foreign investment especially in the Property Sector.

With this in view, it would be prudent to fast-track efforts to encourage more foreign buying of real estate, thereby opening the potential for substantial FDI as well stimulate demand in the property market.

Allowing foreigners currently based in Sri Lanka to purchase apartments with their domestic earnings (without having to remit from overseas), allowing expats to finance a portion of their purchase price through domestic banks in LKR provided the major part is remitted from overseas , and liberalizing regulations for long term resident visas are among some of the interventions that would help in this regard.

On behalf of the Condominium Developers Association of Sri Lanka, I would appreciate if you would consider the above points, and take necessary measures to ensure the continued viability of property development as a major driver of employment, economic development, and urban transformation of Sri Lanka.


Condominium Developers Association of Sri Lanka

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Sri Lanka’s RAMIS online tax collection system “not operatable”: IT Minister

ECONOMYNEXT – Sri Lanka’s online tax collection system RAMIS is “not operatable”, and the Ministry of Information Technology is ready to do for an independent audit to find the shortcomings, State IT Minister Kanaka Herath said.

The Revenue Administration Management Information System (RAMIS) was introduced to the Inland Revenue Department (IRD) when the island nation signed for its 16th International Monetary Fund (IMF) programme in 2016.

However, trade unions at the IRD protested the move, claiming that the system was malfunctioning despite billions being spent for it amid allegations that the new system was reducing the direct contacts between taxpayers and the IRD to reduce corruption.

The RAMIS had to be stopped after taxpayers faced massive penalties because of blunders made by heads of the IT division, computer operators and system errors at the IRD, government officials have said.

“The whole of Sri Lanka admits RAMIS is a failure. The annual fee is very high for that. This should be told in public,” Herath told reporters at a media briefing in Colombo on Thursday (29)

“In future, we want all the ministries to get the guidelines from our ministry when they go for ERP (Enterprise resource planning).”

President Ranil Wickremesinghe’s government said the RAMIS system will be operational from December last year.

However, the failure has delayed some tax collection which could have been paid via online.

“It is not under our ministry. It is under the finance ministry. We have no involvement with it, but still, it is not operatable,” Herath said.

“So, there are so many issues going on and I have no idea what the technical part of it. We can carry out an independent audit to find out the shortcomings of the software.”

Finance Ministry officials say IRD employees and trade unions had been resisting the RAMIS because it prevents direct interactions with taxpayers and possible bribes for defaulting or under paying taxes.

The crisis-hit island nation is struggling to boost its revenue in line with the target it has committed to the IMF in return for a 3 billion-dollar extended fund facility. (Colombo/Feb 29/2024) 

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Sri Lanka aims to boost SME with Sancharaka Udawa tourism expo

ECONOMYNEXT – Sri Lanka is hosting Sancharaka Udawa, a tourism industry exhibition which will bring together businesses ranging from hotels to travel agents and airlines, and will allow the small and medium sector build links with the rest of the industry, officials said.

There will be over 250 exhibitors, with the annual event held for the 11th time expected to draw around 10,000 visitors, the organizers said.

“SMEs play a big role, from homestays to under three-star categories,” Sri Lanka Tourism Promotion Bureau Chairman, Chalaka Gajabahu told reporters.

“It is very important that we develop those markets as well.”

The Sancharaka Udawa fair comes as the Indian Ocean island is experiencing a tourism revival.

Sri Lanka had welcomed 191,000 tourists up to February 25, compared to 107,639 in February 2023.

“We have been hitting back-to-back double centuries,” Gajabahu said. “January was over 200,000.”

The exhibition to be held on May 17-18, is organized by the Sri Lanka Association of Inbound Tour Operators.

It aims to establish a networking platform for small and medium sized service providers within the industry including the smallest sector.

“Homestays have been increasingly popular in areas such as Ella, Down South, Knuckles and Kandy,” SLAITO President, Nishad Wijethunga, said.

In the northern Jaffna peninsula, both domestic and international tourism was helping hotels.

A representative of the Northern Province Tourism Sector said that the Northern Province has 170 hotels, all of which have 60-70 percent occupancy.

Further, domestic airlines from Colombo to Palali and the inter-city train have been popular with local and international visitors, especially Indian tourists. (Colombo/Feb29/2024)

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Sri Lanka rupee closes at 309.50/70 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 309.50/70 to the US dollar Thursday, from 310.00/15 on Wednesday, dealers said.

Bond yields were slightly higher.

A bond maturing on 01.02.2026 closed at 10.50/70 percent down from 10.60/80 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.10 percent from 11.90/12.00 percent.

A bond maturing on 01.07.2028 closed at 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.30/45 percent up from 12.20/50 percent.

A bond maturing on 15.05.2030 closed at 12.35/50 percent up from 12.25/40 percent.

A bond maturing on 01.07.2032 closed at 12.55/13.00 percent up from 12.50/90 percent. (Colombo/Feb29/2024)

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