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Challenges for affordable housing in Colombo

Sri Lanka’s Population Growth with Urban Sector Population Growth Rate
Sri Lanka’s Population Growth with Urban Sector Population
 Growth Rate 

 Sri Lanka’s GDP is likely to grow a further 7.0% by end-2016.
Interestingly, the services sector contributes the lion’s share, 61%, to GDP.
With strong growth in the services sector in the recent past, it has managed to
create noticeable employment opportunities, helping public wages and salaries
rise sharply. As per Sri Lanka’s Department of Census and Statistics (DCS), the
estimated average household income per month at national level was LKR 45,878
in 2012/13 in Sri Lanka. Mean estimated household income increased by 25.9%
from the previous survey year (2009/10) respectively.

Colombo, the largest city and commercial capital of the country, since
2009 has seen improved confidence in the investment market which triggered an
escalation in property values. Apart from the various infrastructure projects,
an increased migration to Colombo (both from the rural areas and from outside
the country) have emerged as the reasons behind real estate price rises.

Residential Apartment Classification
Residential Apartment Classification
The rising number of high-net-worth individuals and other income segments
resulted in a growing demand for housing. To fulfil the demand, developers
continued acquiring land within the central and secondary sub-markets. Due to
the limited availability of land in the city, select locations within the
central and secondary sub-markets saw faster growth in land prices of around
7-8% on average annually.

Availability of housing
Availability of housing
Increasing construction costs, high borrowing costs have made apartment
prices unaffordable. As a result, the apartment market is largely restricted to
only high-income-earning resident Sri Lankans (RSLs), non-RSLs and foreigners.
Hence Colombo’s select current demographic conditions stress on
unaffordable real estate to lower income group.

  • Only the top 20% of
    income-earning households can afford to buy their dream homes in Colombo
    or its suburbs.
  • Even the top 10% of
    households with a mean monthly income of around LKR 0.3 million can only
    afford a two-bedroom lower-mid property in a secondary location.
  • Even in suburban locations,
    the top 10% of income-earning households may not be able to purchase a
    two-bedroom upper-mid apartment.
  • Therefore, apartments in the
    Central sub-market and in upper-mid and luxury projects in the secondary
    sub-market have to rely on high net worth individual residents and
  • Limited income earners of
    Colombo are forced to opt for properties that are at least 20-25 km away
    from the city limits.
  • The government can offer financial support to average income earners for
    the purchase of affordable housing.
  • Make the construction sector more worthwhile for young people by offering
    opportunities for better qualifications and personal development to overcome
    labour shortage.
  • The infrastructure of the suburban areas should be developed so that
    dependency on the city is reduced.
  •  Private developers are to be incentivised by engaging more and offering
    tax rebates. Administrative streamlining can be offered.

The Government understands the current disequilibrium and to minimise the
social inequality, it has been emphasising
on affordable housing schemes.
The concept of affordable housing revolves around some key parameters such
Provision of basic amenities
The provision of basic amenities such as sanitation, adequate water supply
and power to the dwelling unit is crucial. In addition, community spaces and
amenities such as parks, schools and healthcare facilities in the neighbourhood
are desirable.
Cost of the house
While assessing the affordability of the buyer, the cost of the house
should consider not only the purchase costs of the dwelling unit, but also the
maintenance costs.
Location of the house
An affordable housing project should be located within reasonable
distances from workplaces and should be connected adequately through public
transport. Since housing plus transportation costs will greatly affect
According to Sri Lanka’s Urban Development Authority, in government
promoted schemes, the number of affordable houses is going to double.
Population migration from the rural areas to the city suburbs is expected to
grow, however initiatives taken by the government may not be sufficient.
The following aspects could be considered to revive the segment on
affordable real estate:
Housing needs of the economically weaker segment could be fulfilled if
well-rounded efforts are made by the governments and private builders. This
will not only create the synergy in real estate prices but also create the
possibility of balancing the ecosystem of the city.

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