knowledge forum realtor - Real Estates in Sri Lanka

Table of contents

Property Guide

This is the most important thing as far as we concern based on our experiences. You’re not going to buy a FMCG, for most of us a life time investment, all in all, you’re going to spend lot of your hard earn money on buying a single asset.

Similarly, when you’re going to rent/lease decide what you want; from where you want and for how long you want. Otherwise, your time will be wasted along with money and ended up with dissatisfaction.

So, define yourself what you want, take ideas from your spouse, parents, think about facilities, infrastructure available and potential development of areas you looking at, etc and finally, you decide what you want & from where you want it based on your budget.

Why do you want to go with a good broker?

Firstly, we’d love to replace the word “good” which mentioned above with “qualified”, had there’s a properly organized qualification process available in our country. However, selecting a good broker surely reduce lot of your workload in the process of buying the best matched property for you.

1. For brokers, it’s bread and butter of their lives. They know the real estate market like the palm of one’s hand. 2. Once you explain your requirement with your budget, they’ll either tell you whether it’s possible to proceed or not or, perhaps they could add some ideas or give you multiple alternatives. 3. They’ll search properties for you, visit properties for you, send property details (with images) for you and even shortlist properties for you. Save your time, reduce your hassles and arrange appointments to visit the properties for you. 4. Importantly, as long as you’re the buyer, you’ll get all these professional services for free; let’s say 95% of times. (In common practice of Sri Lanka, brokers do not charge any fee from the buyer, however, under certain circumstances, there are some brokers who charge a fee from the buyer too.)
How to select a good broker?

Here in Sri Lanka, we don’t have proper qualification process for brokers. Hence, there are certain brokers who work unprofessionally and sometimes unethically towards the buyer/seller and disappoint their clients in the end. So, be mindful in selecting a good broker, otherwise, the whole process might end up with disappointments & regrets.

1. Best way to come up with a recommendation/s of known person/s of yours.
2. Do a background research, question him/her and assess the broker; experience matters.
3. Ask about the deals he recently closed successfully and get referrals if possible.
4. After all, you should feel comfortable with him/her.

1. Do a basic search in online and printed sources and select several properties.
2. Check availability, arrange appointments and visit physically, take photos, review each and every properties and then short list at least 5 properties. (Had you hired a good broker, he would have done these steps for you.)
3. Re-visit them all (if married, go with your spouse) and spend at least 20-30 minutes for one property. Check each and everything that is visible.
- Double check boundaries
- Access road and width (perfect if it has 20ft wide access, but it should at least have 12 ft. wide access)
- Better if you could avoid triangular shape properties (lands).
- Assess the neighborhood (You’re going to live with them)
- Check whether the property has an approved survey plan (if not, ask owner to do it)
- Check electricity and water supply
- Review infrastructure available in the area and potential developments in near future
- If it’s a bare land and you’re going to build a house, you better show it to your architect and get his opinion (This is irrelevant for tenants)
- If you’re going to buy a ready-made house, you better check builder’s background and assess projects done by him. Check the fittings and fixtures used to build. Further, you could get an opinion from a professional. Last, but not least, check the COC (http://www.gic.gov.lk/gic/index.php/en/component/info/?id=1355&task=info).
4. Price Negotiation.
One of the key factors of, most of the buyers. Everybody likes to get the best property at lowest possible rate. Your good broker has a significant role here. At the end of the day, at least, both parties should agree to an arm’s length price. 5. Finally, select one or two properties out of the shortlisted list.

1. Select a good lawyer
- Could be a family lawyer
- Could be a referral of a known person of yours
- Could be one of your friends
Either way, better to find an experienced (10 years or so) lawyer actively engaged in property matters.

2. Documents you need to check when buying a property
Your lawyer will definitely advise you on this. However, FYI, here’s the list most probably he/she will ask you to submit.

- Original copy of approved survey plan
- A copy of the deed
- Extracts (30 years backwards) (better to get by buyer’s side)
- Non vesting certificate (usually owner furnishes these and can be taken from provincial authority of the area)
- Street line certificate (usually owner furnishes these and can be taken from provincial authority of the area)
- COC
- Any other document your lawyer requests

3. After evaluating, lawyer will do a title report and give you the title clearance.
4. If the clearance and all are fine, now you could proceed, otherwise, we recommend you to give up.

No need to say deed transfer is done by and in front of the lawyer. Usually, the payment also made at the point of transferring the deed, hence, in front of the lawyer.
This can be done in lawyer’s office, in a bank or in any other place where agreed by all three parties. We, recommend you to do this in a bank; one of the (if not the most) simple and secured way of doing this. Plus, your lawyer will notify you what needs to bring, etc.
After all, lawyer will send the deed to the land registry and the process usually takes a month or so and then you’ll be handed over the registered deed by your lawyer.
Keep all the documents in a safe place.

Before sign the agreement;
- Read all terms and conditions at least 3 times and clarify each and everything clearly to yourself. Don’t even keep a single doubt.
- Exit clause, advance, rental, maintenance, key money, valid period, etc all should be included in the agreement.
- Settle the payments in front of the lawyer, either in his office or better in a bank.
- Collect your copy of the deed of lease once your lawyer received the registered copies.

When purchase a property
1. Transfer deeds
- Stamp duty
* 1st LKR 100,000 = 3%
* Balance = 4%
- Lawyer fee = 1%
These fees born by the buyer and calculate based on the value given by a valuer of relevant provincial authority. (Your lawyer will guide you on this).

When rent or lease a property
1. Transfer deeds
- Stamp duty = 1%
- Lawyer fee = 1%

Lawyer fee divided equally among the tenant and the land lord and stamp duty normally born by the tenant.

* A good broker and a good lawyer can save your precious time and hard-earned money. Top of all, they’ll able to find you a hassle-free property which matches most of your requirements; if not all.

When SELL a property

1. Firstly, you come to a conclusion that you want this property to sell. If not the whole property, decide;
- What’s the extent you want to sell?
- Which side of your property you’re going to sell?
- How you’re going to set the access road? (20ft wide is the best, 15ft. better under certain limitations and 12ft is wide access is a must)
- When you set access roads always be mindful to set with minimum wastage

When RENT/LEASE a property

Generally, we use the word “rent” when a specific property conveys to another party for 2 years or lesser period and use the word “lease” when conveys for a longer period than 2 years but for specified time period.

1. Define the property you’re going to rent/lease and decide for how long

General guidelines whether you’re the seller or the lessor


2. Price
Do a small research and set the price
- Set it with room for negotiations
- Should be realistic

3. Survey plan
It is important to have an approved survey plan in your hand before you’re going to sell the property. If you’re going to sell a house, then of course you need to have COC (http://www.gic.gov.lk/gic/index.php/en/component/info/?id=1355&task=info).
- Mark boundaries properly
- Draw the survey plan and approve it
- If a building, get the COC
4. Prepare your property
- Make sure your property looks good.

Why do you want to go with a good broker?

Firstly, we’d love to replace the word “good” which mentioned above with “qualified”, had there’s a properly organized qualification process available in our country. However, hiring a good broker/s surely reduce lot of your workload in the process of selling your property to the buyer you expected.

1. For brokers, it’s bread and butter of their lives. They know the real estate market like the palm of one’s hand.
2. Once you give them details of the property, they know whom to refer and whom not to. Plus, they know how to approach and how does not to. Further, they could give their opinion on the price you set considering their experience and other related factors.
3. Plus, they may have potential buyers in hand for your property. If not, they’ll do advertising on behalf of you and find prospects for you, further; they’ll visit your property with those prospects and convince them to buy, on behalf of you.
4. Your entire property selling process will be professionally handled till the end and your precious time will be saved. Importantly, you’ll be provided all these services just for 3% from the finalized price of the deal.
5. Broker Fee
When you hire a broker, discuss about his/her fee at the very initial stage. If possible, go for a written agreement. But, keep in mind not to give exclusive right to any broker, by doing that you limit your opportunities. We tell you this with our experience. Considering current practice.
* Brokerage Fee – We always recommend you to go for the standard method; that is 3% from the final price. Ask them to keep margins from your price end up with so many dissatisfactions and regrets in most of the times.

How to select a good broker?

Here in Sri Lanka, we don’t have proper qualification process for brokers. Hence, there are certain brokers who work unprofessionally and sometimes unethically towards the buyer/seller and disappoint their clients in the end. So, be mindful in selecting a good broker, otherwise, the whole process might end up with disappointments along with regrets.

1. Best way to come up with a recommendation/s of known person/s of yours.
2. Do a background research, question him/her and assess the broker; experience matters.
3. Ask about the deals he recently closed successfully and get referrals if possible.
4. After all, you should feel comfortable with him/her.

There are various channels that connect you to potential buyers. Some are printed, others are digital. Though we’re in 19th year of the 21st century, still we cannot totally ignore printed media. Our recommendation is go for the both channels and keep some extra weight on digital media; especially online channels.
1. Identify your target market
2. Select the language you’re going to use for the advertisement considering your target market.
3. Select the marketing channels you’re going to use.
- Ex: One printed and one digital
4. Prepare the advertisement.
- Better not to over-crowded with too much information, but only with important facts about your property
- Better to go with at least a single photo (especially in digital media)
- Keep the ad simple and keep spaces in the background
- Double check your contact details (Better to put two contact numbers and one email id)
- Stay alert on calls and email after you published the advertisement

Legal documents

1. Approved survey plan
- When you give copies to clients and brokers, our recommendation is to draw a line across the plan and write “search purposes only”.
2. Deed copies
- Better to be careful with giving deed copies, always keep written records when you give a copy to a 3rd party. Usually deed copies come in to the transaction at the final stage, when extracts are required.
3. Non vesting certificate
- As the owner you should take this from the relevant public authority of your area. Keep in mind, this expires in 3 months. 4. Street line certificate
- This also has to be taken from relevant authority of your area and this too expires in 3 months.
5. COC
- If you’re selling a house, you better have this. Especially a brand-new house or recently built house. Plus, based on your target market need of COC could be vary
6. Extracts
- Usually, extracts are taken by buyer’s lawyer or buyer. A copy of deed needs for this. Plus, extracts also expires in 3 months. Anyways, you don’t have worry about this.

* The most secure way is handing over all legal documents to buyer’s lawyer; either directly by you or your lawyer.

Transfer the deed

No rocket science. Always better to do this in a secure place, in front of your lawyer. Either in lawyer’s office or in any other agreed place (Ex: Bank).

Fees

For a Seller

Usually, when you selling the property you don’t liable for any statutory fee (But keep in mind about CAPITAL GAIN TAX), but, if you hire a broker, agreed broker fee should pay. In such a scenario, standard practice is to settle the broker fee at the point of transferring the deeds.

For a Lessor

- Stamp duty 1% (Born by the tenant), (Total rent for the agreement period * 1%)
- Lawyer fee 1% (Born 50:50 by the owner (land lord) and the tenant)
- Broker fee: This applies only if you hire a broker.
Usually all fees settle at the point of signing the agreement.

(This applies only when acquiring a property outright)

Always, foreigners get a special attention when they’re going to acquire a property here in SL and of course, it is quite interesting too. Firstly, we’ll look at who are considered as foreigners and what are the possibilities, exceptions that given them to acquire properties in our country.
* All immigrants are expats, but all expats are not immigrants.
* All expats are nonresidents, but all expats are not non-citizens.
* All immigrants can be non-citizens except people who are having dual citizenships.

Possibilities of acquiring a property

With respect to the law practicing currently in SL, foreigners are not eligible to purchase almost all the properties directly other than apartments/condominiums, yet, with a condition. However, throughout this guide, we’re trying to explain you the possible ways that you can acquire a real estate property in Sri Lanka.

Apartments/ Condominiums

This is the only property that allows foreigners to purchase directly as of now in SL (any floor even in the ground floor) but, under one condition. That is, they have to pay the total amount upfront via an inward foreign remittance before transfer the deed.

Lands and Houses

Before the budget of year 2013, buying properties on freehold weren’t prohibited for foreigners. However, since then it is tightly restricted, but, still there are certain ways that foreigner can be direct/indirect owners of lands/houses in SL.

Direct ways

- By inheriting (Apply Sri Lanka’s law, despite from which country you’re)

* If your parent/s bought a land or a house before the year 2013 or,
* If your parent/s are immigrants and they’ve properties here in SL or,
* If you become a heir in any other legally acceptable way,
you’re receiving a property from by inheriting, in such a scenario you’re eligible to get the same ownership that your inheritor has had despite you being a foreigner.

- By a gift from parents

Again, * If your parent/s bought a land or a house before the year 2013 or,
* If your parent/s are immigrants and they’ve properties here in SL or,
* If your parents got the ownership by inheriting, and, they’re willing to transfer the ownership to you via a deed of gift; in such a scenario you’re eligible to get the ownership that your parent/s has had despite you being a foreigner.

- By obtaining dual citizenship

“Dual Citizenship applicable to;
A person whose citizenship of Sri Lanka has ceased under section 19, 20 or 21 of the Citizenship Act, No 18 of 1948 or a person whose Citizenship of Sri Lanka is likely to cease.

* Resumption – Section 19(2) of the said Act makes provisions in respect of a person whose citizenship of Sri Lanka has ceased due to obtaining of citizenship in another country and who thereafter desires to resume the status of a citizen of Sri Lanka.

Or

* Retention – Section 19(3) of the said act makes provisions in respect of person who is having a desire to obtain citizenship in another country, while intends to retain the citizenship of Sri Lanka.”
(More details : http://www.immigration.gov.lk/web/index.php?option=com_content&view=article&id=299&Itemid=59&lang=en)

Indirect ways and alternatives

It is unlikely of using any indirect way to acquire residential properties.
- Incorporate a Private Limited Company (with or without foreign majority) or a PLC under The Companies Act No. 07 of 2007 of Sri Lanka (Further explained in our corporate section)