Foreigners can buy property in Sri Lanka, but there are certain legal and regulatory requirements to follow. Here’s a comprehensive guide to help you navigate the process:
1. Understand the Legal Framework
•Ownership Restrictions: Foreigners cannot own freehold land directly in Sri Lanka. However, there are alternatives:
•Leasehold Ownership: Foreigners can lease land for a period of up to 99 years.
•Owning Apartments: Foreigners can purchase apartments on any floor above the ground floor, as the land itself is not owned.
•Corporate Ownership: Setting up a Sri Lankan company can be a way to own property. However, foreign ownership in companies owning land must be below 50%.
2. Identify the Type of Property
•Apartments: Condominiums and apartments are popular choices for foreign buyers due to fewer restrictions.
•Leased Land: For those interested in villas, holiday homes, or commercial ventures, leasing is the way forward.
•Commercial Property: Special provisions are available for investing in commercial real estate, especially in tourist zones or approved investment areas.
3. Engage Professionals
•Real Estate Agents: Use reputable agents who are familiar with the local market and laws.
•Lawyers: A legal expert can help verify ownership, title deeds, and compliance with laws.
•Surveyors: Employ a surveyor to assess the property’s boundaries and condition.
4. Conduct Due Diligence
•Verify the ownership of the property and ensure there are no disputes or encumbrances.
•Confirm that all taxes, levies, and dues on the property have been cleared by the current owner.
5. Financial Considerations
•Payment in Foreign Currency: Transactions must be done in foreign currency through an Inward Investment Account (IIA) opened at a local bank. This ensures legal remittance and repatriation of funds.
•Taxes and Fees:
•Stamp Duty: Typically 4% of the property value.
•VAT: 15% for certain types of property.
•Lawyer Fees: Usually 1–3% of the property value.
•Other Fees: Survey and notary charges.
6. Purchasing Procedure
1. Reservation Agreement: For apartments, a reservation fee is often required.
2. Sale and Purchase Agreement (SPA): After conducting due diligence, sign the SPA with the seller.
3. Transfer of Ownership:
•For leases, the lease agreement is signed and registered.
•For apartments, the deed of transfer is executed and registered at the local land registry.
7. Post-Purchase Steps
•Title Registration: Ensure the property is registered in your name or leased entity.
•Utilities and Maintenance: Arrange for water, electricity, and other services.
8. Special Considerations
•Tourism Investment Zones: Properties in these zones often have special incentives for foreigners.
•Government Policies: Stay updated on policy changes regarding foreign investment in real estate.
9. Seek Guidance from Authorities
•The Board of Investment (BOI) and the Urban Development Authority (UDA) can provide additional information for foreign investors.
By following this guide and working with experienced professionals, you can safely invest in Sri Lankan real estate.
