The Ultimate Guide to Buying Property in Sri Lanka as a Foreigner

Whether you're planning to move to Sri Lanka, looking to own a piece of paradise, or aiming to grow your money by investing in Srilankan real estate, understanding the property buying process is crucial, especially if you're not a Sri Lankan citizen. Luckily, our comprehensive guide to purchasing property in Sri Lanka has got you sorted.

Investing in Sri Lanka's real estate market especially as a foreigner from offers a unique blend of tropical paradise and lucrative returns. This guide will walk you through everything you need to know about buying property in Sri Lanka as a foreigner, from understanding legalities to finding the perfect property.

Why Invest in Sri Lanka's real estate?

Can Foreigners Buy Property in Sri Lanka?

Yes, foreigners can buy properties in Sri Lanka but there are specific rules and regulations has to be followed. Here are the key points:

• Apartments and Condominiums: Foreigners can purchase apartments or condominiums, including those on any floor. However, the entire payment must be made upfront through an inward foreign remittance before the deed of transfer is executed.
• Leasing Land: Foreigners cannot buy land on a freehold basis but can lease land for up to 99 years.
• Private Companies: A private company with up to 49% foreign ownership can buy or lease property in Sri Lanka.
• Public Companies: Public companies listed on the Colombo Stock Exchange with more than 50% foreign ownership can purchase immovable property under the Land (Restrictions on Alienation) Act 2018

Options for Foreigners to Enter the Property Market

Foreigners can invest in Srilankan real estate through various means:

• Leasing Property: Lease agreements can last up to 99 years.
• Inheritance: Property can be inherited from parents.
• Gifts: Property can be gifted by parents.
• Private Companies: Form a private limited company with local shareholding above 50%.
• Public Companies: Invest in a public company with the requisite shareholding structure.
• Buying Apartments: Purchase condominiums or apartments on any floor.
• Dual Citizenship: Obtain dual citizenship to facilitate property ownership

Legal Framework for Foreign Investors

• Ownership Laws: Foreigners can own condominiums above the 4th floor but cannot own land outright. Instead, land can be leased for up to 99 years.
• Leasehold vs. Freehold: Foreigners can lease land but must navigate specific regulations. Leasehold properties allow for long term investment while maintaining compliance with local laws.
• Regulatory Requirements: Essential documentation includes a passport, visa, and proof of funds. Legal assistance is crucial to navigate the complex legal landscape.

Buying Land in Sri Lanka

Foreigners cannot buy land outright due to restrictions from the 2013 budget and subsequent legislation. However, leasing land for up to 99 years is permitted, and there is no longer a 15% land tax on such leases since January 1, 2016.

Popular Regions for Investments in Sri lanka

• Colombo: The commercial capital with high rental yields and a vibrant market for luxury apartments and commercial properties.
• Galle: Known for its historic charm and beachfront properties, Galle offers excellent investment opportunities in villas and tourism related properties.
• Kandy: This cultural heartland features scenic views, cooler climates, and a mix of residential and investment properties.

Investing in Sri Lankan Real Estate as an Expat:

There are multiple options to buy a property in Sri Lanka as an expat:

• Under the Expat's Name: If an expatriate wants to buy an apartment under their name, they must pay the Land Tax for foreigners at 100% of the property's value. This essentially means paying double the cost, with half going to the government.
• Leasing the Property for 99 Years: To avoid the hefty Land Tax, an expatriate can lease the property for 99 years, reducing the Land Tax to 7%. The property can still be sold or rented during this period without complications.
• Via a Private Limited Company: An expatriate can form a private limited company where they own up to 49% of the shares. A local partner would own the remaining shares but would grant all legal powers and custody of the 51% shares to the expatriate.
• Via a Public Limited Company: Thanks to The Land (Restrictions on Alienation) Act 2018, companies listed on the Colombo Stock Exchange, with either minority or majority foreign ownership, can purchase immovable property.

Average Property Prices in Sri Lanka :

As of March 2021, the average sale price of a 4 bedroom house in Sri Lanka was LKR 45.17 million ($230,000 USD), and a 3 bedroom apartment was LKR 41.46 million ($210,000 USD). Here are some average house prices in various regions:

• Southern Province: LKR 23.78 million ($119,386 USD)
• Central Province: LKR 31.41 million ($157,629 USD)
• North West Province: LKR 15.73 million ($78,971 USD)
• Uva Province: LKR 20.45 million ($102,688 USD)
• Sabaragamuwa Province: LKR 23.48 million ($117,880 USD)
• Eastern Province: LKR 25.03 million ($125,661 USD)

What Types of Properties Are Available?

Sri Lanka offers a variety of residential properties to suit different lifestyles and preferences:

• Houses
• Apartments
• Bungalows
• Villas

If you wish to wake up to lush green plantations or scenic valleys, a bungalow or villa in the countryside might be ideal. For those who prefer the convenience of city living, an apartment in the city center provides easy access to amenities. Take a look at the available properties at our property page.

VAT and Other Taxes

• VAT on Property Sales: An 18% VAT applies when buying from a VATregistered company. The rate increased from 15% on January 1, 2024.
• Stamp Duty: 1% for leasing land up to 99 years and 3% for the first LKR 100,000 when buying property, with 4% thereafter.
• Capital Gains Tax (CGT): A flat 10% rate on gains, effective from April 1, 2018.

Taxes for Landlords

• Stamp Duty: 1% on lease agreements.
• VAT: 18% if leasing to a VATregistered person, except for residential premises.
• Withholding Tax (WHT): 10% when renting to a company if the rent exceeds LKR 100,000 per month.

Mortgages and Moving Money

Foreigners cannot obtain mortgages from local banks, but dual citizens and non-resident Sri Lankans can. Funds for purchasing property must be channeled through an Inward Investment Account (IIA).

Need more Information?

Investing in Sri Lanka's real estate market can be a rewarding venture with the right preparation and guidance. Have more doubts? Enquire with us today to navigate smoothly and make a profitable investment in one of the world's most beautiful and promising markets.

Ready to invest in Sri Lanka? Contact us today for expert advice and property listings tailored to your needs. Visit the contact page by clicking on this link.