Expats
Key Regulations and Restrictions
The primary law governing foreign property ownership in Sri Lanka is the Land (Restrictions on Alienation) Act of 2014, with subsequent amendments. This law generally prohibits non-citizens from directly purchasing freehold land. However, there are several legal avenues for expatriates to acquire property
Buying or Investing as an Expat
Here is a brief explanation of the process for buying property as an expat in Sri Lanka
Apartments/Condominiums
- This is the most straightforward option. Foreigners can purchase apartments or condominium units on any floor, provided the entire value is paid upfront in a foreign currency channeled through a special account (an Inward Investment Account or IIA) at a local bank.
Leasehold Land
- Expats can lease land for a long-term period, typically up to 99 years. This is a common method for those interested in villas, bungalows or commercial ventures, as it provides secure, long-term tenure without outright ownership.
Corporate Ownership
- Foreigners can acquire freehold land by forming a private company in Sri Lanka. Under this structure, foreign ownership must not exceed 49%. While a local partner holds the majority share (51%), a legal agreement can be drafted to grant the foreign investor full legal powers and economic rights.
Financial and Legal Process
Purchasing property as an expat involves navigating legal and financial requirements carefully. To ensure a secure and smooth transaction, follow the steps outlined below, including professional guidance, due diligence, fund transfers and compliance with regulations.
Engage Professionals
- It is highly recommended to hire a reputable real estate agent and a local lawyer who is knowledgeable about the laws and regulations. A lawyer is crucial for conducting due diligence, verifying the title deed and ensuring the property is free of encumbrances.
Due Diligence
- Your lawyer will perform a comprehensive title search to confirm legal ownership and check for any disputes or outstanding taxes on the property.
Financials
- All funds for the property purchase must be remitted from overseas through a designated Inward Investment Account (IIA) opened in a local Sri Lankan bank. This account facilitates the transaction and is also the channel for repatriating funds if you sell the property in the future.
Agreements and Transfer
- Once due diligence is complete, a Sale and Purchase Agreement is signed, followed by the execution of the deed of transfer. This is a legal process that requires the presence of a notary and witnesses.
Taxes and Fees
Be prepared for various costs, including:
- Stamp Duty: The buyer typically pays this. For property purchases, it’s 3% on the first LKR 100,000 and 4% on the balance.
- Value Added Tax (VAT): An 18% VAT is applicable when buying from a VAT-registered company (e.g., a developer).
- Legal Fees: Lawyer fees can range from 1% to 3% of the property’s value.
- Brokerage Fees: Typically around 3% of the property’s value.
Post-Purchase
After the deed is registered at the local land registry, you can arrange for utilities and other services.
- Visa Considerations: Simply buying property does not grant an expat an automatic residency visa. However, programs like the Resident Guest Scheme and the Golden Paradise Visa allow for long-term residency (5 to 10 years) for foreigners who meet certain investment thresholds, which can include investing in real estate.
