12Backed by supportive government policies, Sri Lanka is fast emerging as the hottest spot for investors in South Asia.

Screen Shot 2016-06-01 at 1.17.40 AMSince the end of the nearly quarter century civil war in 2009, Sri Lanka has had a peaceful domestic environment resulting in the country attracting a large inflow of foreign exchange with investment in the real estate industry alone accounting for over a billion dollars, primarily from the Asian region.

In fact, Sri Lanka is ranked among Asia-Pacific’s top 10 foreign direct investment (FDI) hotspots, according to a study by US-based global information company, IHS Inc. The other Asia-Pacific FDI hotspots are China, Indonesia, Vietnam, the Philippines, Myanmar, Thailand, India and Bangladesh.

Further, the economy has been aided by favourable government policies which have boosted investors’ confidence. According to the Board of Investment (BOI) of Sri Lanka, the government has plans to transform Sri Lanka into a strategically important economic center by developing five strategic hubs – a knowledge hub, a commercial hub, a naval and maritime hub and an energy hub, taking advantage of Sri Lanka’s strategic location and resources.

Along with the developments that are taking place, Sri Lanka is also on the verge of being classified by the World Bank as a middle-income country with the per capita income projected to sufficiently increase in the very near future. The figure is targeted to cross USD5,000 by this year while it was USD4,000 per capita in 2014.[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1,2,3,4,5″ ihc_mb_template=”1″ ]


12cSri Lanka also has an open economic policy having pioneered South Asia’s economic liberalization over 3 decades ago. Liberalizing many areas of the economy, the government has embraced strategies and policies that are very conducive for international investment. Today, Sri Lanka is ranked as the most liberalized economy in South Asia. Investors are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100% repatriation of profits.

Screen Shot 2016-06-01 at 1.18.04 AMAccording to the Index of Economic Freedom which measures the pro-business policy environment of a country published by the Heritage Foundation, Sri Lanka has in 2014 been ranked 90 out of 186 developed and developing countries in terms of its “economic freedom” and quality of its overall policy environment.

Sri Lanka ranks above India, Pakistan, China, Bangladesh, Indonesia and Vietnam in South and Southeast Asia, with the higher ranking indicative of a more attractive investment climate.

In line with the government’s policies, efforts are being intensified to attract investments to target sectors in which Sri Lanka has a strong foundation for growth as well as areas where it is nationally important to develop.

Sri Lanka also has an enviable record of political credibility in the International arena. The government has never defaulted nor requested re-scheduling of any of its international obligations. Significantly, this protection extends to foreign investors. Bilateral investment agreements supported by constitutional guarantee, provides strong protection for foreign investments in Sri Lanka.

Bilateral Investment Protection agreements exist with the following 28 countries – Belgium, Canada, China, Denmark, Egypt, Finland, France, Germany, Iran, India, Italy, Indonesia, Japan, The Republic of Korea, Luxemburg, Malaysia, The Netherlands, Norway, Pakistan, Romania, Singapore, Sweden, Switzerland, Thailand, the United Kingdom and the USA.

Sri Lanka also has double taxation avoidance agreements with 38 countries.


The end of the civil war also opened up areas within the country which are now major tourist attractions. This and the peace that prevail after the civil war have increased the number of tourist arrivals as well as level of spending per tourist, according to the Sri Lankan Tourism Development Authority. Tourist arrivals reached 1.5 mil in 2014 and is targeted to reach 2.5 mil by this year.

India is a large source of tourists while the number of Chinese visitors has grown and European and Middle Eastern numbers continue to grow.

The country is renowned for its beautiful beaches, cultural sites, wildlife and scenic beauty.


These modernization efforts and infrastructure developments are expected to further enhance real estate values within the city as more people and businesses relocate there.

Recent legislation introduced states that a foreigner can now hold 49% shareholding of a company that buys land, which is up from the previous 25%; the balance 51% has to be held by a Sri Lankan nominee. After 20 years, this same company then gains the same rights as a Sri Lankan individual and can buy freehold land unconditionally.

Also, a foreigner can lease property for 99 years by paying a one-off tax of 15% based on the value of the lease.

This new law paves the way forward for a clear and transparent solution for foreigners, individuals or corporations, to invest in the Sri Lankan real estate market.

With an economy that is continuing to grow, support from the government, good infrastructure and a very recent ranking by the World Bank as being the No 1 country in South Asia in terms of ease of doing business, Sri Lanka is certainly a very strong option that must be considered by prospects seeking overseas investment opportunities


The government has launched a programme to completely upgrade the sea, road, power and telecom backbone of the country.

Screen Shot 2016-06-01 at 1.22.43 AMExtensive road network

New expressways which were introduced have made tourism and investor arrivals more pleasant and have reduced travel time considerably. The 25.8km-long Colombo-Katunayake Expressway from the New Kelani Bridge to Katunayake, the Southern Highway from Colombo to Matara completed in 2014 and Phase I of the outer Circular highway connecting Colombo to other neighbouring towns completed in early 2014 are some of the major road development projects.

Phase II and III of the outer circular highway are likely to be completed in 2016 and 2017. Work has already commenced on the Colombo – Kandy highway which is to be expanded to Jaffna and Trincomalee.

Sea Port and Airport Development

As part of the Colombo Port expansion project, the South Container terminal was completed in 2013 and the East Container terminal was completed in 2014. Prior to that, the Hambantota Port development project was completed in 2010. With these ambitious projects, Sri Lanka is looking boldly to compete with Singapore and Dubai as a maritime center.

Further, the Bandaranaike International Airport expansion project is underway to expand the capacity for arrivals and departures. By 2017, 8 gates, 14 aerobridges, an aircraft parking apron and a taxiway, as well as the modernization of utilities such as water supply, electricity and waste water disposal are scheduled to be completed.

Power and Energy

The construction of the 1st Phase of the Norochcholai Coal Power Project (300MW) was completed by end 2010 and added to the National Grid by end March 2011. The 2nd Phase will add another 600MW to the national grid.

The Upper Kotmale Hydro Power project having an installed capacity of 150MW was completed and connected to the national grid in July 2011.

Other projects

12bThe Beira Lake restoration project consists of diverting the sewerage network around the Beira Lake. At the same time, the scenic beauty, recreation and water sports potential of the lake will be emphasized.

Other projects include the York Street facelift, the Fort Railway station modernization, the marine drive expansion, Port city as well as the mass transit systems such as metro rail and monorail which have been proposed.[/ihc-hide-content]

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