What does 2016 hold for investments in real estate?
The big question on all real estate professionals' lips is: what will
2016 hold? Migration away from capital cities, infrastructure
improvements and increased international interest among investors are
some of the expected developments for real estate markets within
emerging nations, including Sri Lanka.
According to Managing Director of online real estate platform Lamudi
Sri Lanka, Hugh van der Kolff, 2016 will see the development of Sri
Lanka's smaller cities.
"The government must invest in these cities to improve transport
services, water and electricity supplies, and develop infrastructure so
that they can compete with Colombo, and on an international scale," he
said.
"In these cities, with lower land, resource and building costs;
investors will get a better return on their investments. This makes
these second tier cities a very attractive option for real estate
professionals," van der Kolff said.
Second-tier growth
Industry professionals have noted the increased attraction of second
and third tier cities in emerging urban areas. Rapid population growth
has led to physical growth of urban areas in cities including Colombo,
Jakarta, and Manila.
As larger cities slowly saturate, real estate developers and
investors alike are turning their attention to cities such as Kandy and
Galle. In second and third tier cities, property is significantly
cheaper as a result of higher land availability and lower building
costs.
As countries such as Sri Lanka experience rapid population growth,
urbanization, and economic development, the demand for commercial
property is increasing. This includes mixed-use developments, shopping
malls, retail space and office units.
The next 12 months may see an increase in commercial property
development across Sri Lanka, and neighbouring countries, as the sector
must accommodate population and tourist growth, and increased interest
among international corporations.
These projects are not only driving economic growth, they also
provide employment opportunities and boost the value of surrounding
properties.
REIT
Will 2016 be the year of the real estate investment trust (REIT)? The
past 12 months have seen a number of real estate investment trusts
opening in emerging markets, encouraging investments in the sector.
In October, 2015, Kenya's Capital Markets Authority approved the
country's first income real estate investment trust, also known as I-REIT,
to be issued by investment manager Stanlib Kenya.
This marks the first ever licence to an asset management firm, to
list on the Nairobi Securities Exchange (NSE). In June, Pakistan's first
ever REIT was launched, paving the way for expected growth in the
country's commercial property sector.
More emerging nations are expected to follow this lead over the next
12 months. Following the announcement in Sri Lanka's 2016 Budget,
industry experts forecast the creation of the country's first REIT, to
encourage local and international real estate investment.
Foreign investment
Laws are changing in many of the emerging markets. While it is still
not legal for foreigners to own property in all countries, legislation
is being drawn up to encourage real estate investment.
Finance Minister Ravi Karunanayake hopes to remove the 15 percent
land leasing tax for foreign investors, which is expected to have a
great impact on the local real estate market. The removal of land lease
tax for foreigners is expected to increase international investments to
the sector.
App focus
Mobile is driving innovation in developing countries. Internet users
in these countries are skipping traditional desktop use, and moving
straight to mobile. While 2015 saw more emerging markets-focused
companies developing their Internet presence, 2016 will see real estate
professionals turning their attention to apps.
As a result of high costs of Internet services in many developing
countries, apps are increasingly popular when it comes to interacting
with online companies. As Internet penetration strengthens in
second-tier and suburban areas, reduced mobile connectivity costs, more
affordable SIM cards and the evolution of mobile technology are driving
app use.
- Lamudi media release
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