COVID19 Pandemic on Colombo Real Estate Market

Like a whirlwind the pandemic managed to sweep through and immediately close down the entire economy of the country. 51% of the Sri Lanka’s GDP contribution comes through the western province and regarded the most populous province in the country with stark disparity of the haves and the have not although the daily wage earners and population below the poverty line still have access to charitable donations as opposed to the rural counterparts who are suffering the worst.

From the day the virus made headlines in mainland China businesses in Sri Lanka have felt the effects although no subjects in Sri Lanka had contracted the virus. Local businesses were heavily reliant for sourcing of raw materials from China and have faced production delays as a result in multiple industries.

As the country has come to a stand still a closer look at real estate asset classes reveal how the virus has impacted them.

Colombo is already struggling with an oversupply in the residential market, however the 2 bedroom apartment within the city may survive as recession proof investment. We may expect a dip in the rest of the apartment types. 

Apartments that were in progress have come to a stand still due to the lock-down and surely nothing has happened for the past 14 days days where the government has issued a work from home notice. Surely no one can stay at home and plaster and draw electric cables on their project sites.

The investors are more concerned about their cash reserves as the economy is threatened with job cuts and lower demands that is foretasted until the recovery. Households are more concerned in spending for their needs than to look for a capital investment at this moment.

Interests that was expected in the gated community market has come to a stand still and may resurface once the country is clear of the virus.

Visionary mixed developments in the commercial real estates have come to a stand still at the moment with construction delays. Labour in these development projects have migrated to their homes and we may expect some turnover as soon as the project restarts construction. 

Landlords are expecting rent delays or renegotiating the rents on most commercial platforms. As retail industry is completely shut down. Malls in Colombo have not operated for more than 14 days. Even post opening we are expecting that the public will most likely hesitate to spend whatever is left in their hands on a luxury good as households would expect to have a decent amount of cash in their hands to get on with their lives.

Just like in Singapore a good strategy to implement would be no parking fee levied in malls until further notice can attract customers to improve trading as soon as the lock down if lifted. Worst comes to worst the mall goers can buy goods with money than pay to park their clunk.

Businesses in the capital have also halted any operations from the day of the shut down and have looked at cutting down expenditure and overheads. Businesses who were bullish and were catering offshore clients have now come back to re look at their relocation strategy and be more conservative on their spending capacity.

The first local subject with the virus was identified as a Chauffeur Guide who guided his clients (I’m not going to specify who were the client and where they were from as a common courtesy) through the cultural triangle and lucky to have avoided the crowded beaches in their itinerary.

Sri Lanka was just getting back to servings its clients in the peak season after the horrible Easter attacks in 2019 which affected the livelihoods of all those dependent in the travel and tourism industry and now this happened. So effectively another peak season with virtually not achieving the expected turnover.

Hotels like Club Dolphin in Waikkal managed by Hemas Holdings with repeat clientele and full occupancy during the peak season have shown interest to let people in for quarantine although it has not been used up-to now.

Sri Lankan hotels have lost most of it’s revenue during the peak season as a result of the virus spreading to its major source markets like mainland China and Europe.

Just like Sri lanka Maldives is also dependent on tourism offering luxury beach resorts and from the day there were positive subjects identified at the resorts the government has ordered all resorts to be closed for the next 3 months and disinfect the properties. The largest source market of Maldives was Italy and I’m sure no Italians would be going on holidays very soon.

The Sri Lankan health officials have taken correct measures to curb the virus by sending all everyone who have arrived to the island from the 1st of March to quarantine centers located in multiple locations who have been cared for by the Sri Lankan Army. 

Post returning home this British tourist speaks BBC about how he felt safe staying in Sri Lanka than in Britain and that Sri Lanka gave more assurance to fight the virus click for link