- SL’s economic crisis makes migration easier than building a house in Colombo
- NHDA finds need for 42,000 middle-income housing units in Colombo
“Owning a house is now a dream,” says Ruwan Pradeep, a 34-year-old resident of Kesbewa, his words capturing the frustration felt by many middle-income Sri Lankans.
“The Government has promised us several loan schemes to purchase a house, but when you go to a bank, you realise how difficult it is to obtain one. Even to get a loan to build a house, you need a substantial deposit. Who would take a loan if they had savings? You end up needing two or three loans just to build a house. From day one, you can’t live happily in that house because you have a huge debt to pay off.”
Highlighting the lack of effective Government policies, Pradeep pointed out: “Actually, it’s easier to migrate rather than building a house in Colombo.
“Some people ask why one would want a house in Colombo, but the question is, where else should we build a house? Both my wife and I work in private companies in Colombo. We’ve been trying to build a house since 2018 and have only managed to complete half of it. We have a loan to repay and still live in a rented house. This is the ultimate truth for most middle-income earners in this country. Nowadays, you can’t even build a house by selling all your properties,” he lamented.
Pradeep’s story is a harsh illustration of the broader housing crisis gripping Colombo.
As Sri Lanka’s most populated and vibrant city, Colombo has long been a beacon of opportunity, drawing people with its economic prospects, cultural diversity, and historical charm. Yet the escalating housing crisis now threatens to overshadow these opportunities, making the dream of homeownership increasingly unattainable for many.
In recent years, the dream of owning a house in Colombo has slipped further out of reach for middle-income earners. The economic turmoil that has gripped Sri Lanka has had a particularly severe impact on real estate prices in Colombo. With property values soaring to unprecedented heights, the hope of purchasing a house has become a distant fantasy for many hardworking families.
Priced out of the market
The root of this crisis lies in a combination of factors. The economic crisis has led to rampant inflation, devaluation of the local currency, and a sharp increase in the cost of living. Consequently, real estate prices have skyrocketed, driven by speculation and a limited supply of affordable housing.
Middle-income families, already struggling to make ends meet, find themselves priced out of the market, unable to compete with wealthier investors and foreign buyers who dominate the real estate landscape in Sri Lanka at present.
Sharing similar sentiments to Pradeep, Shamen Perera, a resident of Boralesgamuwa, expressed his frustration, saying: “My wife and I visited every bank to obtain a loan. Almost all banks offer high-interest rate loans that we cannot afford. Additionally, when we check the prices of houses available for sale, it’s impossible to purchase one; we could only afford a quarter of those houses.”
He continued: “My problem is, who is deciding these prices? Is it the website owners? Is there a monitoring mechanism or any price cap for these lands? Obviously, there must be a proper valuation done on these properties. If so, the authorities responsible for the valuation should be mindful of the rates as well. Only the upper-middle or high-class people can afford a house in Colombo.”
Current state of affairs
In Sri Lanka, the private sector predominantly drives the mainstream housing delivery process. Meanwhile, State agencies like the Urban Development Authority (UDA) and local authorities play facilitative roles, allowing market forces to guide supply. This market-driven approach has left a substantial portion of the middle-income group, particularly the lower-middle-income segment, excluded from the mainstream housing market.
A survey conducted by the National Housing Development Authority (NHDA) in Colombo identified a pressing need for 42,000 middle-income housing units (Housing Needs Assessment and Data Survey – 2016, latest available).
Forecasts indicate that the demand for housing continues to rise rapidly. Since this demand is concentrated in urban areas and their immediate surroundings, housing developments significantly impact urban spaces, utilities, facilities, amenities, and the overall quality of life for residents.
A survey conducted by the Housing and Construction Ministry revealed that out of the total six million Sri Lankan families, only 5.2 million owned a house. Additionally, it highlighted that 216,197 families were homeless and landless, while another 166,841 families owned only a plot of land.
According to the Housing Assessment Survey, approximately 83,593 families have completely moved out and live in rental accommodations, with another 79,680 families temporarily renting while owning permanent residences elsewhere.
A report by the Research Intelligence Unit (RIU) (latest available) projected a substantial increase in luxury apartment units in the commercial capital in 2018-’19, rising from 783 units in 2009 to 2,657 units recently, with expectations of reaching around 6,000 units.
UDA response
In response, the UDA has developed a plan to introduce a general policy guideline for regulated high-density housing development across all urban areas in Sri Lanka, with a particular focus on Colombo, the Colombo Metro region, Kandy, Ratnapura, Anuradhapura, and other major urban centres.
Against such a backdrop, the UDA has implemented a series of housing programmes tailored to different income segments in and around Colombo. These initiatives include middle-income housing projects like the Oval View apartments in Pelangasthuduwa, Borella, aimed at Government sector employees with 608 units, and upper-middle-income projects such as the Elite Place apartments in Borella offering 400 units.
These projects prioritise factors such as accessibility, environmental friendliness, and proximity to infrastructure. Additionally, recognising the need for more affordable housing options, the Government launched a dedicated affordable housing programme under the ‘National Policy Framework Vistas of Prosperity and Splendour’. These efforts collectively aim to address the diverse housing needs of the population by providing accessible and affordable housing solutions across different income levels.
Despite the urgency of these projects, the UDA had to suspend them for several years due to a lack of public funds. However, the authority recently received Cabinet approval to resume three of these proposed housing projects.
UDA Director (Housing) M.H.V. Rathnakumar stated: “We have received Cabinet approval to recommence construction on three housing schemes aimed at middle-income earners. Construction will commence soon. Each housing unit is estimated to cost around Rs. 20 million excluding taxes.
“We plan to sell these units at approximately Rs. 20 million before taxes. Including taxes, the final cost will be slightly higher than the estimated amount,” Rathnakumar explained.
“We aim to complete the projects within two years. Additionally, the remaining pending housing projects will commence in the near future. However, there will be a slight difference from our current method. Previously, we used a system called pre-sale. Instead of relying heavily on injecting a large sum of Government funds, we plan to commence construction in collaboration with private companies under a Public-Private Partnership (PPP),” he elaborated.