Friday Sep 20, 2024
Friday Sep 20, 2024
Friday, 24 April 2020 00:00 - - {{hitsCtrl.values.hits}}
The Condominium Developers Association of Sri Lanka (CDASL) has written to President Gotabaya Rajapaksa seeking urgent support and relief to the property development and construction industry in view of the impact from the global and local spread of the novel coronavirus (COVID-19).
CDASL maintains that the property development industry employs hundreds of thousands of people, both directly and indirectly, throughout Sri Lanka. This includes ordinary yet skilled and semi-skilled workers, professionals and technical personnel whilst supporting SMEs from building material providers, to manufacturers and installers of a range of finished goods and equipment.
“A slowdown in development activity will have immediate impacts on these firms (and their employees) which will only get resolved when development projects are able to move forward,” CDASL Chairman Suresh Rajendra has informed President Rajapaksa in their letter with copies to Prime Minister Mahinda Rajapaksa, Secretary to the President Dr. P.B. Jayasundera and Ministry of Urban Development and Housing Secretary Dr. Priyath Bandu Wickrama.
Among recommendations are: Permit and facilitate the commencement of construction projects as soon as practically possible since all construction sites in Sri Lanka are suspended, and with them employment and income for many thousands of workers and SMEs; a resumption of work in construction could be done based on clear regulations and restrictions as advised by the Government’s health authorities.
CDASL also wants inclusion of property developers among the list of industries/sectors eligible for financial concessions recently announced by the Central Bank to help with working capital/cashflow pressures. It has been pointed out that with very large capital outlays for projects, developers are among the first to go into financial distress with an economic downturn.
The cascading effect of suspension of development projects will ripple through the economy at multiple levels as banks, personal investments of homebuyers, and hundreds of thousands of jobs will be at risk. CDASL suggests clear guidelines need to be issued to banks and the financial sector on preferential interest rates, loan moratoriums, etc.
It also recommends that the Board of Investment should extend the project period permitted under the BOI agreements for projects which are currently underway and impacted by the shutdown.
This is because all construction sites have been shut down and global supply chains for materials and equipment are severely impacted. Given these circumstances, delays in construction projects are unavoidable, and ensuring BOI concessions are extended to accommodate such unavoidable delays would be critical to ensuring viability of many of these projects.The President has also been requested to allow the importation of project-related materials. CDASL noted that there was some ambiguity on imports of building materials and equipment since the authorities had made statements regarding imports being restricted to essential items only. A clarification on this would be helpful to avoid further disruption in project supply chains.
CDASL also wants PAL, CESS and other such levies to be waived on project-related material for a stipulated time period to stimulate the development activities and reduce cost structures.
“Relief on para tariffs for project specific imports will reduce cashflow pressures on developers and contractors alike in the current revenue-constrained environment and help projects to keep moving,” it has been emphasised.
Encouraging new investments greater than a stipulated value by granting very attractive concessions is another recommendation.
CDASL said Sri Lanka needed new investments to move forward and grow. With a global slowdown, attracting new FDI and launching new investments will be substantially harder. Highly concessional terms will be needed to ensure viability of projects that can be kicked off in the coming year or two.
“We trust the Government will put in place aggressive concessions to stimulate investment in new projects as well,” Rajendra has said in the letter to President Rajapaksa.
The need to fast-track the implementation of REITs and related legislation/regulations is also among recommendations by CDASL. It was pointed out that the slowdown of the economy both locally and internationally will inevitably cause a drop in land and property valuations which in turn will substantially expose banks who often use land and property as collateral for lending.
Creating an enabling legal/tax environment for the launch of REITs would help mobilise more equity capital/FDI and also stimulate more long-term investment in the real estate space, which in turn could help stabilise property prices.
CDASL also wants the Government to encourage foreign buying/investment in Sri Lankan real estate “Given the Government’s strategic approach to managing the COVID outbreak, Sri Lanka is emerging among the countries displaying effective crisis management capability and resilience. This is a huge positive and could encourage foreign investment especially in the Property Sector,” it pointed out.
“With this in view, it would be prudent to fast-track efforts to encourage more foreign buying of real estate, thereby opening the potential for substantial FDI as well stimulate demand in the property market. Allowing foreigners currently based in Sri Lanka to purchase apartments with their domestic earnings (without having to remit from overseas), allowing expats to finance a portion of their purchase price through domestic banks in LKR provided the major part is remitted from overseas, and liberalising regulations for long term resident visas are among some of the interventions that would help in this regard,” the CDASL letter to the President stated.
It has appealed to the President to consider these recommendations and take necessary measures to ensure the continued viability of property development as a major driver of employment, economic development, and urban transformation of Sri Lanka.
The CDASL letter also acknowledges and commends all efforts taken by President Rajapaksa and the Government to curb the spread of COVID-19 and ensure the welfare of citizens. “We are also aware of and appreciate all the measures the Government has put in place in its effort to minimise impacts on the economy,” it added
