Frequently Asked Questions

Selling a property

It is very simple! You could conveniently send us your property details via ‘Submit my Property‘ link on the website. If you wish, you could also request a call-back from an agent via ‘Contact Us‘ form.

Preparing your home before listing it for sale is essential to creating a strong first impression and maximizing your final sale price. A few simple, low-cost improvements can make a significant difference in how buyers perceive your property.

Key preparations include:

  • Painting: Fresh, neutral paint instantly brightens rooms and gives the home a well-maintained feel.

  • Deep Cleaning: Ensure the entire property is spotless — including floors, windows, bathrooms, and kitchens.

  • Decluttering: Remove excess furniture, personal items, and unnecessary décor to make spaces look larger and more inviting.

  • Eliminating Odors: Address any lingering smells from pets, cooking, or dampness. A clean, fresh scent is essential during viewings.

A well-prepared home helps buyers form a positive impression within the first few seconds. Neglecting these steps can lead to reduced interest, lower offers, and a longer time on the market.

At Colombo Realtors, we always advise clients to invest the extra time and effort into preparing their homes. These small improvements can greatly increase buyer appeal and help you achieve the best possible sale outcome.

Determining the right selling price for your home can be challenging. Price it too high, and it may sit on the market without attracting buyers; price it too low, and you risk losing value. In fact, overpricing is one of the most common mistakes property owners make.

The value of your home is influenced by several key factors:

1. Location & Neighborhood
The area you live in, including amenities, schools, access roads, and overall demand plays a major role in determining price.

2. Comparable Sales (Market Comparisons)
Buyers and agents look at what similar-sized and similar-condition homes in your neighborhood have recently sold for. These “comparables” form the benchmark for your pricing.

3. Age & Condition of the Property
Well-maintained homes with modern upgrades typically command higher prices. Major repairs, structural issues, or outdated interiors can reduce the value.

4. Current Market Conditions
Property values fluctuate based on supply and demand. In a seller’s market, prices tend to rise; in a buyer’s market, they may soften.

At Colombo Realtors, we recommend a professional property valuation to determine the most accurate and competitive price. This ensures you attract the right buyers and achieve the best possible return.

In Sri Lanka, the age of the property plays a key role in determining its sale price:

  • Properties built within the last 20 years: Buyers typically pay for both the land and the building, meaning the structure adds value to the property.

  • Properties older than 20 years: Generally, these are sold based on land value only, as the building is considered to have minimal market value due to age and potential maintenance needs.

Even for older properties, well-maintained homes or those with renovations may still attract higher offers, so highlighting upgrades and improvements can help maximize the sale price.

When selling property in Sri Lanka, buyers typically request several documents to verify ownership, legality, and compliance. Providing these upfront helps streamline the sale and build buyer confidence. Common documents include:

  • Title Deed – Proof of ownership

  • Approved Survey Plans – Confirms land boundaries

  • Street Line Certificate – Verifies property alignment with local roads

  • Building Line Certificate – Confirms construction complies with regulations

  • Certificate of Conformity (COC) – Confirms legal occupancy of the building

  • Certificate of Ownership – Additional proof of legal ownership

  • Non-Vesting Certificate – Confirms property is not vested in any other entity

  • Development Clearance Certificates – Approvals from local authorities for any constructions

  • Rate/Tax Payment Receipts – Proof of property tax and local authority payments

  • Other Certifications & Clearances – As required by local regulations

  • Utility Bills – Paid under the seller’s name to show active accounts

  • Valuation Report – Optional, but can help justify the asking price

Ensuring all documentation is accurate and up-to-date can make your property more attractive to buyers and help prevent delays during the transaction.

Yes, you can sell your property even if there is an outstanding home loan, but the bank’s consent is required. The sale process will depend on how the buyer plans to pay:

1. Buyer is taking a home loan:

  • The process is smoother if the buyer obtains a loan from the same bank holding your mortgage.

  • In this case, the bank can transfer the property papers directly without needing to release them to another bank first.

2. Buyer is paying in full (cash payment):

  • The buyer can pay the bank directly to settle your outstanding loan.

  • The property papers will be released to the buyer only after the bank has recovered the full loan amount.

By coordinating with your bank and clearly communicating the process to the buyer, the sale can proceed smoothly without legal complications.

Whether to sell your current home before buying a new one depends largely on your financial situation and flexibility:

  • If you need funds or equity to finance your next purchase or meet mortgage requirements, it’s generally advisable to sell your current property first.

  • Keep in mind that selling first may require temporary housing, such as renting a property until your new home is ready.

  • If you have sufficient funds or access to bridging finance, you may choose to buy first and sell later, but this can involve added financial risk and overlapping costs.

Ultimately, the decision should be based on your budget, timeline, and risk tolerance, and a real estate professional can help plan the optimal sequence for your situation.

Typical Commission Rate

• Generally ranges between 3% – 5% of the property value.

Who Pays the Commission?

• In most cases, the seller is responsible for paying the agent’s commission.
• If an agent is representing the buyer, a separate buyer’s fee may apply.

Important Note

• It is advisable to clarify payment responsibility at the beginning of the transaction — whether the fee will be paid by the seller, the buyer, or shared between both parties.

Renting a property

Renting property in Sri Lanka typically involves two main types of agreements – Tenancy Agreements and Lease Contracts. The terms you can negotiate depend on whether the property falls under The Rent Act of Sri Lanka, which can significantly influence the rights and obligations of landlords and tenants.

1. What is the Rent Act and When Does it Apply?

The Rent Act governs many rental properties in Sri Lanka and generally provides strong protections for tenants, including limitations on rent increases and eviction.

Properties not governed by the Rent Act include:

  • Residential homes occupied by the owner on 1st January 1980 and rented out thereafter

  • Commercial properties built after 1st January 1980

  • Properties rented to foreign individuals or companies (under specific conditions)

  • Premises above certain annual value thresholds or owned by companies

If the Rent Act does not apply, the landlord and tenant are free to decide the terms without statutory restrictions.

2. What is a Tenancy Agreement?

A Tenancy Agreement is typically a non–fixed-term arrangement and can be written or verbal.

Tenancy Agreements without Rent Act applicability:

  • Terms such as rent, deposit, and payment method are freely negotiated

  • No special taxes or statutory limits

  • Recommended to sign before a notary for legal protection

Tenancy Agreements under the Rent Act:

  • Rent is controlled based on government-assessed property value

  • Tenant protections are stronger

  • Landlord can only terminate the tenancy for legally valid reasons, including:

    • Non-payment of rent (over one month)

    • Illegal or immoral use of the premises

    • Serious damage to the property

3. What is a Lease Contract?

A Lease Contract is a fixed-term agreement that gives both parties greater security and structure.

Requirements:

  • Must be written and signed before two witnesses and a notary

  • Must be registered at the Land Registry for legal enforceability

If the Rent Act does not apply:

  • All terms—rent, deposit, duration—can be freely negotiated

If the Rent Act applies:

  • Security deposit cannot exceed three months’ rent

  • Extra payments (gratuities, side payments) are prohibited

  • A Certificate of Conformity (COC) is required to confirm lawful occupation

4. What Should Be Included in a Rental Agreement?

Regardless of the agreement type, ensure the following are clearly stated:

  • Security deposit and refund conditions

  • Payment terms (rent due date, method, rate increases)

  • Responsibilities for repairs, utilities, and municipal rates

  • Inventory list if the property is furnished

  • Standard notice period (typically one month)

  • Conditions for termination

5. What Legal Safeguards Should Tenants Follow?

  • Always sign a formal written agreement

  • Verify ownership and title documents through a lawyer

  • Check the Certificate of Conformity for newly built premises

  • Confirm there are no encumbrances or disputes related to the property

6. What Should Foreign Tenants Be Aware Of?

Foreign tenants should take extra precautions:

  • Use a reputable agent or lawyer

  • Confirm ownership and building approvals

  • Ensure payments and agreements are documented properly

Summary

The rental process in Sri Lanka depends heavily on the type of agreement and whether the Rent Act applies.

  • Tenancy Agreements offer flexibility but fewer fixed protections.

  • Lease Contracts offer structured, long-term security but require formal registration.

Understanding these frameworks helps landlords and tenants enter into agreements confidently and legally.

It is simple as clicking on a few links and submitting the details. Please send us the details via ‘Submit my Property‘ link on the website. If you wish, you could also request a call-back from an agent via ‘Contact Us‘ form.

Yes, you can get this done through a special Power of Attorney.

A Power of Attorney (POA) is a legal document that allows a person (the “principal”) to authorize another person (the “attorney-in-fact” or “agent”) to make decisions and act on their behalf regarding assets, finances, or real estate properties.

Types of Power of Attorney:

  1. General Power of Attorney

    • Grants broad authority to the agent.

    • The agent can perform a wide range of actions, including selling, leasing, or sub-leasing property, managing finances, and other decisions related to the principal’s assets.

  2. Special Power of Attorney

    • Grants authority for a specific task or transaction only.

    • The agent’s powers are limited to what is explicitly stated in the document.

A POA is commonly used when the property owner is unavailable or unable to manage their affairs personally, ensuring that legal and financial matters can still be handled efficiently.

In Sri Lanka, there are two different ways to rent a property, according to legal differences in the terms of a contract. You can have a “Tenancy” agreement, or a “Lease” contract. If the rental property is also governed by the Rent Act, the rules, terms and power of the landlord or tenant will differ.

For properties that are covered by the Rent Act, the law tends to be in favour of the tenant in Sri Lanka. For properties not covered by the Rent Act, the law tends to favour the landlord.

The Rent Act governs all properties in Sri Lanka, except in the cases highlighted below:

  • Residential premises occupied by the owner on 1st of January 1980, which have been let since this date.
  • Business premises constructed after the 1st of January 1980 and let on from this date.
  • Residential premises used by a person who has a valid visa under the Immigrants and Emigrants Act, and who has a monthly income of at least 1000 Rupees.
  • All business premises used by a foreign company (except of the premises were let before the 12 of December 1980)
  • All premises, including business premises in certain areas, if the annual value of the premises (as specified in the rates assessment) exceeds a certain amount.
  • Premises where the landlord is a company registered under the Companies Act No. 17 of 1982.

Tenancy agreement

Without the Rent Act

A tenancy is a rental with a non fixed term, and so is an agreement, that is not necessarily written. The tenancy agreement can be defined as the authorisation (from the Landlord) of use of his property to the tenant.

Both parties can break the contract freely, if it is announced with at least one month’s notice. If there is dispute, this may include legal intervention to evict the tenant. If the property is not governed by the Rent Act, the terms of the tenancy agreement (including deposit amount, terms of payment, method of payment etc) are discussed, negotiated, and agreed freely between the parties (tenant and Landlord). Tenancy agreements are not subjected of any fine or tax, unlike Lease contracts, which are taxed at 1 %.

With this kind of contract, it is advisable to write an official copy of the agreements, that is signed by both parties. Notary services should be used to ensure greater security in the renting process.

With the Rent Act

If the property is governed by the Rent Act, then the renting price is set against the value which has been given to the property by the state.Tenancies under the Rent Act, give more power to the tenants. The landlord cannot freely end the contract unless he has one of the following legal reasons:

  • Late rent payment of over one month
  • Use of the premises for illegal/immoral activities
  • Substantial deterioration of the premises due to misuse of the property.

Unless at least one of these situations occurs, the landlord is not legally allowed, under the Rent Act, to cease the Tenancy contract.

The lease contract

The lease contract is a legal contract recognised by the local law (Roman Dutch Law). It is the most secure way to possess (for a limited amount of time) and use a property owned by another entity. The lease contract is a fixed time agreement, and the lease period should be clearly expressed in the written contract.

The contract can be defined by a “pro tanto alienation of the land/property,” but this option requires far more procedure, and includes several administrative tasks.

If the property is not governed by the Rent Act, the landlord and tenant can freely agree on all points of the lease contract. This still gives a lot of leeway to negotiate prices and conditions. If this is not the case, and the property is governed by the Rent Act, it is forbidden to pay a deposit greater than the value of 3 month’s rent, any gratuity or commission.

The lease contract has to be signed by both parties in front of two witnesses and a notary. In order to legally protect the tenant, the lease has to be registered at the land registry. When leasing a property, you have to ask the Landlord you are in contact with, to provide a Certificate of Conformity (a document that legally states that the premises can be lawfully occupied).

In order to avoid any scam as an expat, it is advised to hire a lawyer, who can check the reliability of the offer and of the legal documents as the Property’s Certificate of Conformity. This will include checking whether the property is encumbered or not, duly and officially registered, and of course, if the property legally belongs to the Landlord.

Rental and security deposits

With regards to the legal situation of the property, the deposit and agreements of the rental contract are more or less freely chosen and agreed. In any renting contract, it is important to cover the following points:

  • Security Deposit
  • Terms of Payment
  • Responsibility for repairs
  • Responsibility for payment of rates
  • Mutual covenants (Landlord/Tenant obligations with respect to the situation)
  • Personal covenants
  • Inventory of the goods

Normally, even under the Rent Act, the rent is paid monthly, and there is a deposit given to the Landlord. The usual termination notice of the contract is one month. As explained earlier, all general terms of the contract can be discussed and agreed. When renting a property not governed by the Rent Act, you should also be able to negotiate the price. The landlord is legally free to rent his accommodation to who he wants, at the price he wants. Some new rules were added to the Rent Act in 2002, though in Sri Lanka, the landlord’s control on his property is quite limited as the tenant is favoured.

In Sri Lanka, real estate agencies are typically compensated through a commission, shared between the landlord and tenant:

  • Landlord: Pays one month’s rent as the standard commission.

  • Tenant: Usually pays half a month’s rent as their contribution.

This fee covers the agency’s services, including marketing the property, arranging viewings, and facilitating negotiations, ensuring a smooth and professional rental process.

Buying a property

When purchasing property in Sri Lanka, buyers typically encounter the following primary taxes and levies:

1. Stamp Duty

  • A one-time tax on the deed of transfer, usually paid by the buyer.

  • Rates:

    • 3% on the first LKR 100,000 of the property value

    • 4% on the value exceeding LKR 100,000

2. Value Added Tax (VAT)

  • Applicable only to new apartments purchased directly from a VAT-registered developer.

  • Current rate: 18% of the purchase price

  • Not applicable to resales of residential properties by individual owners

3. Social Security Contribution Levy (SSCL)

  • A 2.5% levy on the transaction value

  • Often passed on to the buyer by the developer for new property purchases

In Sri Lanka, stamp duty is typically paid by the buyer of the property.

  • Deed of Transfer: The buyer pays the one-time tax when registering the property transfer with the Land Registry.

  • Lease Agreements: If a property is leased, the lessee (tenant) generally pays stamp duty on the lease agreement, unless otherwise agreed with the landlord.

Paying stamp duty is a legal requirement to ensure the property transfer is officially recognized and valid under Sri Lankan law.

When purchasing property in Sri Lanka, engaging a solicitor or attorney is essential to ensure legal compliance and smooth transfer of ownership.

  • Typical Fees: Solicitors usually charge 1–3% of the property value for services such as:

    • Legal due diligence on the property

    • Drafting and reviewing contracts and deeds

    • Coordinating the registration of the property transfer

These fees help protect buyers from legal disputes, ownership issues, and hidden liabilities, making them a crucial part of the property purchase process.

To ensure a property transaction is fully legal, it is essential to engage a qualified solicitor or attorney.

  • The solicitor/attorney conducts legal due diligence, which includes:

    • Verifying ownership and title deeds

    • Checking for any encumbrances, liens, or disputes

    • Ensuring all approvals, permits, and clearances are in order

    • Reviewing contracts and transaction documents for compliance

Relying on a professional ensures that all documentation is authentic and legally sound, protecting both buyers and sellers from potential issues.

Purchasing and renting a property each come with their own benefits and drawbacks. The most suitable choice depends on finances, lifestyle, and long-term goals. Below is a clear comparison to help buyers or tenants evaluate their options.

Advantages of Renting

• Minimal responsibility for repairs and maintenance
• Flexibility to relocate without long-term commitment

However, renting also has limitations:

• No equity or long-term investment growth
• No tax benefits
• Rent may increase over time
• Limited freedom for renovations or personal modifications
• Housing security depends on the landlord

Advantages of Owning a Home

• Builds equity with each mortgage payment, creating long-term financial value
• Eligibility for tax benefits that may offset costs such as insurance, taxes, and maintenance
• Full freedom to renovate, upgrade, or personalize the home
• Offers long-term security and housing stability

Summary

While homeownership requires financial commitment and ongoing maintenance, many see value in the long-term stability and investment potential it provides. Renting, on the other hand, offers flexibility with fewer responsibilities, making it ideal for those not ready for long-term ownership.

Buying or selling a land

The primary unit used for measuring land in Sri Lanka is the Perch. Although the metric system is officially recognized, perches remain the most common reference in real estate transactions.

Standard Land Conversions

1 Perch = 25.29 Sqm = 272.21 Sq Ft

Acre Conversion

1 Acre = 160 Perches = 4 Roods = 4,000 Sqm

This unit system is important for land valuation, property sales, and land development calculations across Sri Lanka.

No, foreigners cannot purchase land in Sri Lanka. The sale of land to foreign individuals or companies has been prohibited since the 2013 budget.

  • Leasing Land: Foreigners may lease land for a maximum of 99 years.

  • Land Tax: As of 1st January 2016, foreigners or companies with more than 50% foreign ownership are exempt from the 15% land tax under the Land (Restrictions on Alienation) Amendment.

This framework ensures controlled foreign involvement in land ownership while allowing limited long-term leasing options.

In Sri Lanka, property tenure refers to the legal rights and ownership structure associated with land. There are two main forms of tenure, each offering different levels of control and security to the holder.

 

1. Freehold

Freehold denotes full and permanent ownership of land or property.
The owner has the right to:

• Use the property
• Sell, transfer, lease, or mortgage it
• Pass it on to heirs

Ownership is subject to applicable laws and regulations but generally offers the highest level of control.

 

2. Leasehold

Leasehold is a time-bound form of ownership or usage right, granted by the government or a private owner for a specified period.
Key aspects include:

• Use of land or property for an agreed duration
• Conditions defined within a legally binding lease agreement
• Rights may revert to the owner after lease expiry unless renewed

Lease terms may vary depending on purpose, location, and negotiated conditions.

Taxes and Property Law in Sri Lanka

When purchasing or leasing property in Sri Lanka, buyers and investors should be aware of the taxes and professional fees involved. These costs typically include stamp duty, legal fees, and other associated charges.

 

1. Stamp Duty

• Leasing Land (up to 99 years):
 1% stamp duty on the total lease value.

• Purchasing Property:
 • 3% stamp duty on the first LKR 100,000
 • 4% stamp duty on any amount above LKR 100,000

 

2. Legal Fees

• Attorneys generally charge 1% – 3% of the property value for document preparation, including sale agreements and title transfers.

 
Other Possible Costs

• Notarial Fees — For verification and execution of property documents.
• Registration Fees — May apply when registering deeds and transfers.
• Valuation Fees — Required when an official valuation report is needed.

When purchasing, transferring, or leasing real estate in Sri Lanka, several statutory taxes and charges may apply. Below is a simplified overview of the key taxes involved.

1. Stamp Duty

Stamp Duty is payable on both property transfers and lease agreements.

a) Deed of Transfer (Sale / Title Transfer)

Stamp Duty charged on the market value of the property:

  • 3% on the first LKR 100,000 (USD 751)

  • 4% on every additional LKR 100,000 (USD 751) or part thereof

The buyer typically pays Stamp Duty unless agreed otherwise.

b) Lease Agreements

Stamp Duty on lease contracts:

  • LKR 10 (USD 0.1) for every LKR 1,000 (USD 7.5) or part thereof
    The lessee usually bears this cost.

2. Land Tax on Leases

Land Tax applies only to leases, and only in specific circumstances related to foreign ownership.

a) 15% Land Lease Tax

Applicable when the lessee is:

  • A foreign individual

  • A foreign company

  • A Sri Lankan-incorporated company with 50% or more foreign shareholding (direct or indirect)

b) Reduced 7.5% Land Lease Tax

A lower tax applies in the following situations:

  • Lease to a Sri Lankan-incorporated company (with >50% foreign ownership) that has operated in Sri Lanka for 10 consecutive years prior to the lease

  • Transfer to a subsidiary of a parent company that meets the 10-year local operation requirement

  • Condominium leases:

    • Above the 4th floor for leases under 35 years

    • Below the 4th floor for leases over 99 years

  • Properties in Special Licensed Zones, Tourist Development Areas, or Industrial Estates

  • Substantial foreign investments approved by the Cabinet of Ministers

3. Exemptions from Lease Tax

No land lease tax applies in the following cases:

  • Land leased to:

    • Diplomatic missions

    • International organizations under the Diplomatic Privileges Act

  • Dual citizens of Sri Lanka

  • Foreign investors under pre-2013 agreements compliant with inward remittance rules

  • Long-term condominium leases (35+ years) above the 4th floor, paid fully via inward remittance

  • Land located within Bonded Areas or Free Ports

  • Leases approved under:

    • Strategic Development Projects

    • Foreign companies relocating international or regional operations to Sri Lanka

4. Who Pays These Taxes?

  • Stamp Duty

    • Paid by the buyer (for transfers) or the lessee (for leases), unless the parties agree otherwise.

  • Land Lease Tax

    • Always paid by the lessee.

 

Acquiring or leasing real estate in Sri Lanka involves Stamp Duty for all transactions and, in the case of leases with foreign involvement, a Land Lease Tax that varies from 0% to 15% depending on eligibility and exemptions.

Foreign investors should always seek legal and tax advice to ensure compliance and to take advantage of any applicable exemptions.

Capital Gains Tax (CGT) is a tax on the profit earned from the sale or transfer of investment assets, including real estate, machinery, and certain financial assets. It was reintroduced under the Inland Revenue (Amendment) Act, No.10 of 2021 and is effective from 1st April 2018.

 

  1. Rate:

    • CGT is charged at a flat 10% on the net gain from the sale of the asset.

  2. Exemptions:

    • Gains below LKR 50,000 or total annual gains below LKR 600,000.

    • Principal residence owned for at least 3 years and lived in for 2 of those 3 years.

    • Assets realized in parts, jointly owned assets, or property gifted to blood relatives.

    • Trading stock or depreciable assets.

    • Share market gains (under the current law).

  3. Cost Calculation:

    • For assets acquired before 30th Sept 2017, the cost is the market value as at 30th Sept 2017.

    • For assets acquired after 1st April 2018, the cost is the actual purchase price plus improvement costs.

  4. Capital Gain Calculation (Example):

    • Land purchased in 2010: LKR 10,000,000

    • House built in 2012: LKR 15,000,000

    • Market value as at 30.09.2017: LKR 32,000,000

    • Renovations: LKR 1,000,000

    • Sale price: LKR 35,500,000

    • Legal/advertising costs: LKR 400,000

    Net gain: 35,500,000 – (32,000,000 + 1,000,000 + 400,000) = LKR 1,600,000
    CGT payable: 10% of 1,600,000 = LKR 160,000

  5. When an Asset is Deemed Realized:

    • Sale, exchange, transfer, or destruction of the asset

    • Grant of an option on the asset

    • Death of the owner or change of residence

    • Retention of the asset with altered rights (e.g., lease)

  6. Transfers Between Associates:

    • Transfers to family members (spouse, children, relatives) or due to death/divorce generally do not trigger CGT for the transferor. The acquirer’s cost basis is the net cost as at 30.09.2017 or acquisition cost post-2018.

  7. Payment:

    • CGT must be declared and paid within 1 month of realizing the asset.

    • Capital losses cannot be offset against gains.

  8. Applicability:

    • CGT applies to both Sri Lankans and foreigners.

    • Applies to profits made on properties sold within a 10-year period from acquisition.

Why was CGT reintroduced?

  • To increase government revenue and ensure equitable taxation of rising real estate values.

  • Recommended by the IMF as part of broader reforms to raise Sri Lanka’s tax-to-GDP ratio.

Additional Taxes:

  • Stamp Duty (4%) still applies on property registration.

For More Information:
Refer to the Inland Revenue (Amendment) Act, No.10 of 2021 or consult a tax professional.

Sri Lanka allows foreigners and expats to rent/lease property freely, but strict rules apply when it comes to buying land or real estate. The legal framework is mainly governed by the Land (Restrictions on Alienation) Act and related regulations.

Below is a full breakdown.

Buying Property in Sri Lanka

Prohibited Transfers

Foreigners cannot purchase land in Sri Lanka. This restriction applies to:

  • Foreign individuals

  • Foreign companies

  • Sri Lankan companies with 50% or more foreign shareholding (direct or indirect)

Subsidiary Rule

A foreign-owned company (>50% foreign shareholding) cannot form a local subsidiary to purchase immovable property on its behalf.

Definition of Land

The term “land” includes:

  • State or private land

  • Submerged land

  • Buildings constructed on such land

Exemptions Where Foreigners Can Acquire Property

Foreigners may acquire property only under specific legally permitted circumstances:

1. Diplomatic & International Organizations

Transfers are allowed to:

  • Diplomatic missions

  • Multilateral or bilateral organizations
    Recognized under the Diplomatic Privileges Act.

2. Condominium Property (Above 4th Floor)

Foreigners can purchase condominium units above the 4th floor, excluding the ground and common floors, provided that:

  • Full purchase price is paid upfront, and

  • Payment is made through inward foreign remittance before the deed transfer

(This is the most common route for expats/investors.)

3. Foreign Investors – Pre-2013 Agreements

If a foreigner has rights under agreements aligned with Cabinet approvals before January 1, 2013, these may still apply.

4. Inheritance

Foreign nationals may acquire property through:

  • Intestacy

  • Gift

  • Will/testament

5. Dual Citizens

Dual citizens of Sri Lanka are treated as citizens for property ownership and may freely acquire land.

6. Banks with 50%+ Foreign Shareholding

Banks may acquire land via:

  • Auctions

  • Court decrees
    As part of loan recovery.

7. Licensed Financial Institutions

Allowed to acquire land to:

  • Enforce leases

  • Execute agreements to sell

  • Recover loans through court processes

8. Long-Standing Companies

Companies operating in Sri Lanka for 10+ consecutive years as of the date the Land Act was certified may acquire land under limited circumstances.

Restrictions on Increasing Foreign Shareholding

Companies that own land and have less than 50% foreign ownership face limitations:

1. No Increase for 20 Years

Foreign ownership cannot increase to 50% or more for 20 years from the date the land was transferred.

2. Consequence of Breach

If foreign ownership rises above 50%:

  • The land transfer becomes void

3. Rectification Period

  • Listed companies: 12 months to reduce foreign ownership

  • Unlisted companies: 6 months

If reduced within this period, the transfer remains valid.

Mortgage Restrictions

Any land transferred or leased to foreigners under exemptions cannot be mortgaged or pledged for five years from the date of transfer.

Secretaries’ Certificates (For Companies Holding Land)

Companies with less than 50% foreign shareholding must:

  • Submit a company secretary certificate confirming current foreign shareholding at the time of land registration

  • Provide updated certificates every 6 months

Can Foreigners Rent or Lease Property in Sri Lanka?

Yes.
Foreigners can rent or lease property without owning the land.

However:

  • Stamp duty applies on lease agreements

  • Land Lease Tax may apply in certain cases where the lessee is foreign or a foreign-owned company

Long-term leases (35+ years) and condominium leases have specific exemptions.

Summary

ActivityAllowed for Foreigners?Conditions
Buy Land❌ NoStrictly prohibited except exemptions
Buy Condominium (above 4th floor)✅ YesFull upfront payment via foreign remittance
Rent/Lease Property✅ YesLease taxes may apply
Inherit Property✅ YesAs a foreign next of kin
Purchase via Foreign-Owned Company❌ NoUnless specific exemptions apply

The consent of the Controller of Exchange is required in the event of any transfer of property by a non-resident. Persons who are deemed to be non-residents are defined in Gazette No. 15007, dated April 21, 1972 and published under the provisions of the Exchange Control Act. Consent is required for:

• The parties to proceed with the sale of the property and to make payment to a non-resident
• The non-resident who received payment to remit the proceeds out of Sri Lanka

As a result of recent relaxation in exchange control regulations, general permission has been granted to Sri Lankan resident buyers to make payments to non-residents of Sri Lankan origin in respect of the purchase of a real estate. However, nonresidents are still required to obtain consent for the remittance of the sale proceeds outside of Sri Lanka.

If a non-resident sells or transfers an immovable property in Sri Lanka, the proceeds of such a sale would not be remittable in full. The non-resident would be permitted to remit the proceeds
to the extent of the amount brought into Sri Lanka by way of inward remittances at the time of the non-resident’s purchase of that property.

In the case of Sri Lankan emigrants, in accordance with the current rules and with the consent of the Controller of Exchange, an initial remittance of USD 150,000 (LKR 20 million) is permitted, followed by a subsequent remittance of USD 20,000 (LKR 2.7 million) annually.

  • VAT: 18% on the purchase price for apartments bought directly from a developer.
    • VAT was reintroduced at 15% in January 2023, and increased to 18% in January 2024.

  • SSCL (Social Security Contribution Levy): 2.5% payable by the buyer to the developer.

  • Applicable To: Typically applies to the primary market only; secondary sales from private individuals may not attract VAT or SSCL.

Sri Lanka offers several long-term residence visa pathways for foreign investors, retirees, and individuals of Sri Lankan origin. Below is a breakdown of each scheme with eligibility, investment requirements, duration, and applicable benefits.

 
1. Golden Paradise Visa Program

Eligibility:
• Foreign investors who deposit minimum USD 200,000 in a commercial bank recognized by the Central Bank of Sri Lanka.

Visa Validity:
• 10-year residence visa — renewable.

Conditions:
• Up to 50% of the initial investment may be withdrawn after 1 year from the date of visa issuance.

Eligible Applicants:
• Primary applicant, spouse, and dependents.

Visa Fee:
• USD 200 per year.

 
2. Investment in Condominium Property

Eligibility:
• Foreign nationals investing in condominium properties in Sri Lanka.

Investment Requirements:
• Urban Areas – USD 200,000 → 10-year residence visa.
• Urban Areas – USD 150,000 → 5-year residence visa (renewable).
• Suburban Areas – USD 75,000 → 5-year residence visa (renewable).

Eligible Applicants:
• Applicant, spouse, and dependents.

Visa Fee:
• USD 200 per year.

 
3. Direct Investments

Eligibility:
• Foreign investors making direct capital investments in Sri Lanka.

Investment Requirements:
• USD 300,000 → 5-year residence visa.
• USD 500,000 → 10-year residence visa.

Eligible Applicants:
• Applicant, spouse, dependents, and support staff (assistants, cooks, caregivers).
• Monthly remittance required: USD 1,500 per support staff member.

Visa Fee:
• USD 200 per year.

 
4. Investments in Treasury Bonds / Treasury Bills / Development Bonds

Eligibility:
• Foreign investors purchasing government securities.

Investment Requirements:
• USD 250,000 → 5-year residence visa.
• USD 400,000 → 10-year residence visa.

Eligible Applicants:
• Applicant, spouse, and dependents.

Visa Fee:
• USD 200 per year.

 
5. Sri Lankan Share Market Investments

Eligibility:
• Foreign investors in the Colombo Stock Exchange.

Investment Requirements:
• USD 100,000 → 5-year residence visa.
• USD 200,000 → 10-year residence visa.

Eligible Applicants:
• Applicant, spouse, dependents, and support staff (assistants/caregivers) with a monthly remittance of USD 1,500 per person.

Visa Fee:
• USD 200 per year.

 

Additional Visa Pathways

 
Permanent Residence for Sri Lankan Descent

• Applicable to individuals of Sri Lankan origin and dependents who cannot apply for dual citizenship.
• Visa issued for 10 years, renewable.

 
Retirement Visa – “My Dream Home” Program (Age 55+)

Eligibility:
• Foreign nationals 55+ years old.

Requirements:
• USD 15,000 fixed deposit in a local bank.
• Remit monthly income:
– USD 1,500 for primary applicant
– USD 750 for each dependent

Visa Validity:
• Long-term resident visa issued in 2-year blocks.

Sri Lanka offers a wide range of competitive incentives to attract and support foreign investors, backed by strong legal frameworks such as Investment Protection Agreements, Double Taxation Relief Agreements, and Free Trade Agreements with key markets including India and Pakistan. These incentives make the country a strategic hub for investment in South Asia.

1. Board of Investment (BOI) Registration

Foreign investors can register projects under Section 17 of the BOI Law No. 4 of 1978, enabling access to customized incentives based on:

  • Scale of investment (small, medium, or large-scale)

  • Business expansion

  • Strategic import replacement sectors
    (e.g., pharmaceuticals, fabric, milk powder, cement)

BOI approval allows negotiated exemptions and tax reliefs specific to the project’s nature and contribution to the economy.

2. Tax & Duty Exemptions

Incentives depend on the business sector (manufacturing, services, agriculture, etc.) and may include:

  • Tax holidays for qualifying projects

  • Duty-free importation of capital goods, machinery, and raw materials (for export-oriented operations)

  • Exemptions from:

    • Value Added Tax (VAT)

    • Customs Duty

    • Port & Airport Development Levy (PAL)

  • Exemptions from certain Exchange Control restrictions

These concessions help reduce startup costs and enhance competitiveness.

3. Strategic Development Projects (SDP)

Projects approved under the Strategic Development Projects Act No. 14 of 2008 may receive high-level incentives such as:

  • Full or partial exemption from Income Tax, VAT, and other levies

  • Concession periods extending up to 25 years

This category is typically reserved for large-scale, nationally impactful investments.

4. Special Concessions for Targeted Activities

Under the Finance Act of 2013, the following BOI-approved activities receive extensive tax benefits:

  • Entrepôt trade (import, minor processing, re-export)

  • Offshore business operations

  • Front-end service centers for overseas clients

  • Regional headquarters operations (billing, financial supply chain, management)

  • Logistics and multi-country consolidation (e.g., bonded warehouses)

These incentives are designed to position Sri Lanka as a regional service and logistics hub.

5. Sector-Specific Restrictions

While many sectors are open to foreign investment, some activities may:

  • Require special government approval, or

  • Be restricted entirely

Investors should verify eligibility through the BOI website or consult a professional advisor.

Why Invest in Sri Lanka?

With its strategic geographic location, investor-friendly policies, and strong legal protections, Sri Lanka offers a compelling environment for foreign investment. BOI-registered ventures gain access to significant tax benefits, streamlined approvals, and long-term stability.

Foreigners cannot still obtain a mortgage from local banks or any other local financial institution, however dual citizens and non-resident Sri Lankans are able to.

Yes, a foreign resident can transfer money to Sri Lanka to purchase eligible property, but the process is governed strictly by Sri Lanka’s Exchange Control regulations. These rules ensure that all inward remittances and property transactions involving non-residents remain compliant with the law.

Key Regulatory Requirements

1. Controller of Exchange Consent

Consent is required when a non-resident is involved in a property transaction.

Approval is needed for:

  • A sale of property to a non-resident

  • Repatriating (remitting) sale proceeds when a non-resident sells property and wants to send funds back abroad

This means foreign buyers can remit funds in, but future repatriation requires strict documentation and approvals.

2. General Permission for Sri Lankan Residents

Sri Lankan residents may purchase property from non-residents of Sri Lankan origin without additional approvals.

However:

  • The non-resident seller must still obtain approval for remitting the proceeds abroad.

3. Remittance Limitations for Non-Residents

If a non-resident later sells the property, the amount they can repatriate is limited to:

  • The exact amount originally brought into Sri Lanka as an inward remittance

Unless special permission is granted, they cannot remit profits beyond the originally inward-remitted amount.

4. Rules for Sri Lankan Emigrants

Emigrants (Sri Lankans living abroad) have specific limits:

  • Initial remittance limit: USD 150,000

  • Annual remittance limit thereafter: USD 20,000
    (Both subject to approval from the Controller of Exchange)

Practical Takeaways

  • A foreign resident can legally transfer money into Sri Lanka to purchase an eligible property type (e.g., condominium units above the 4th floor).

  • Proper documentation of all inward remittances is crucial for future repatriation.

  • Non-residents should consult a bank, lawyer, or financial advisor familiar with Exchange Control regulations to avoid delays or compliance issues.

When purchasing or leasing property in Sri Lanka, buyers and tenants need to be aware of applicable taxes, which differ for primary-market sales and lease agreements.

1. Sales of Apartments (Primary Market)

  • VAT: 18% on the purchase price for apartments bought directly from a developer.
    • VAT was reintroduced at 15% in January 2023, and increased to 18% in January 2024.

  • SSCL (Social Security Contribution Levy): 2.5% payable by the buyer to the developer.

  • Applicable To: Typically applies to the primary market only; secondary sales from private individuals may not attract VAT or SSCL.

2. Lease Agreements

  • Stamp Duty: 2% of the total lease value, calculated on the full lease term.

  • Applicable To: Both residential and commercial leases, unless otherwise exempted by law.

Key Notes

  • Always confirm whether the developer or seller is VAT-registered, as this determines if the 18% VAT applies.

  • Lease stamp duty is calculated based on the aggregate lease period, not just annual rent.

  • Additional fees such as legal costs, notarial fees, and registration charges may also apply.

Sri Lanka’s property ownership and transactions operate under a number of legal frameworks designed to maintain transparency, secure ownership rights, and regulate the transfer of real estate. Below is a structured breakdown of the key legislation and ownership rules in an easy-to-read FAQ format.

 

Key Property Legislations

1. Land (Restrictions on Alienation) Act No. 38 of 2014

• Restricts the transfer of land to foreign individuals, foreign companies, and certain legal entities.

2. Apartment Ownership Law No. 11 of 1973 (as amended)

• Governs ownership, management and transfer of condominium and apartment properties.

3. Ceiling on Housing and Property Law

• Defines the maximum number of residential properties an individual or entity may own.

4. Prevention of Frauds Ordinance

• All transfers of land (sale, gift, lease, mortgage) must be executed before a notary public + two witnesses to be legally valid.

5. Registration of Documents Ordinance

• Regulates registration of deeds and property documents.
• Registration is not required for validity, but it establishes priority of ownership claims.

6. Stamp Duty Act

• Imposes mandatory stamp duty for property transfers to be registered.

7. Land Reform Law

• Sets limits on land ownership and allows redistribution of excess land for public use.

8. Registration of Title Act No. 21 of 1998

• Provides a system of title registration where a certificate of title = conclusive proof of ownership.
• Implementation is currently not fully island-wide.

 

Property Ownership in Sri Lanka

1. Types of Ownership

Property in Sri Lanka may be owned by:
• The State
• Private individuals
• Corporate entities

2. Private Land Transactions

• Ownership is typically transferred by a Deed of Transfer or Deed of Gift.
• Must be signed before a notary public and two witnesses (as per Prevention of Frauds Ordinance).

3. Other Property Transactions

• Leases, mortgages, and other property dispositions must comply with the Prevention of Frauds Ordinance.
• Registration under the Registration of Documents Ordinance establishes priority in claims.

4. Registration of Title

• Under the Registration of Title Act, once registered, the certificate of title serves as final proof of ownership.
• Not fully implemented across all regions yet.

 

Key Notes on Registration

Registration Priority

• Deeds do not require registration for validity — however, registration determines priority of rights in the event of a dispute.

Proof of Ownership

• Title Registration offers definitive ownership proof, unlike deed-based systems where priority is the determining factor.

 

Sri Lanka’s property law framework emphasizes due diligence, notarization, and proper document registration to safeguard real estate ownership. Understanding these regulations is essential for local and foreign buyers, sellers, and investors to transact safely and confidently.

Owning property in Sri Lanka comes with certain statutory taxes and charges. These are mainly imposed by local authorities and, in some cases, the Urban Development Authority (UDA). Understanding these obligations ensures smooth ownership and uninterrupted operation of your property.

1. Assessment Rates

Who Collects It:
The local authority (Municipal Council, Urban Council, or Pradeshiya Sabha) where the property is situated.

How It’s Calculated:

  • Based on the annual value of the property.

  • Annual value is determined by the local authority following an inspection or valuation.

  • Rates differ depending on:

    • The area

    • Type of property (residential, commercial, mixed-use)

    • Local council policies

Payment Frequency:
Quarterly (four times a year).

2. Urban Development Authority (UDA) Charges

When Applicable:

  • Charged only on certain properties based on location, zoning, or building classification.

  • Commonly applies to properties located within UDA-declared development zones or subject to special UDA regulations.

Purpose:
To support urban planning, infrastructure development, and regulatory oversight.

Additional Notes for Property Owners

  • Verify your rates: Always check with the relevant local authority or UDA office to confirm the exact charges applicable to your property, as these can differ by area and property use.

  • Penalties for non-compliance: Failure to pay assessment rates or UDA charges can result in:

    • Fines or penalties

    • Restrictions on approvals, building applications, or property-related transactions

    • Possible legal recovery action by the authority

 

Property owners in Sri Lanka must account for:

  • Assessment Rates (quarterly, mandatory for all properties)

  • UDA Charges (location- and use-dependent)

Staying compliant ensures uninterrupted ownership, avoids penalties, and keeps all property-related services and approvals running smoothly.

Foreign entities may establish and operate businesses in Sri Lanka, subject to Exchange Control laws, investment regulations, and sector-specific restrictions. Below is a full overview of permissible structures, regulatory requirements, and operational considerations for foreign investors.

1. How Foreign Corporations Can Establish Presence

Foreign entities can enter the Sri Lankan market through the following methods:

1. Incorporating a Local Company

Foreign corporations may set up:

  • A wholly owned subsidiary

  • A majority-controlled company

  • A minority stake in a Sri Lankan company

2. Acquiring Shares in Local Companies

Foreign investors may acquire equity in existing Sri Lankan companies, subject to foreign ownership limits in regulated sectors.

3. Registering as an Overseas Company

Overseas companies may register to operate in Sri Lanka, including:

  • Offshore companies

  • Companies with investment concessions under Commercial Hub Regulations

2. Key Registration & Compliance Steps

To establish a presence, foreign corporations must complete:

• Submission of Required Documents

Including:

  • Statutory forms

  • Articles of Association

  • Board resolutions

  • Certified constitutional documents
    Filed with the Registrar-General of Companies (RGOC)

• Payment of Registration Fees

Applicable fees must be paid at the time of incorporation or registration.

• Investment Remittance Requirements

Foreign investment funds must be channeled through a Securities Investment Account (SIA) at a licensed commercial bank.

• Profit Repatriation

  • 100% of profits can be repatriated through the investor’s SIA

  • Subject to compliance with Exchange Control regulations

• Ongoing Disclosure Obligations

Local and registered overseas companies must:

  • File annual returns

  • Maintain statutory registers

  • Submit updates to the Registrar-General of Companies as required

3. Industry-Specific Restrictions on Foreign Ownership

Foreign investment is restricted or regulated in certain protected sectors. Restrictions may include ownership caps or mandatory BOI approval.

Restricted Sectors Include:

  • Agriculture (tea, rubber, minor export crops)

  • Timber and logging

  • Mining

  • Deep-sea and coastal fishing

  • Mass communications and media

  • Education services

  • Travel agencies

Foreign investment may require BOI approval for:

  • Air transportation

  • Military equipment manufacturing

  • Large-scale mining

  • Strategic or sensitive industries

4. Prohibited Sectors for Foreign Investors

Foreign ownership is not permitted in the following activities:

  • Money lending (excluding margin trading for listed securities)

  • Pawn broking

  • Retail trade below USD 1 million initial investment

  • Coastal fishing

  • Private security services

5. Investment Incentives

Foreign corporations may qualify for investment incentives through:

• Board of Investment (BOI) Registration

Under the BOI Law No. 4 of 1978, eligible investors may receive:

  • Tax holidays

  • Customs duty waivers

  • VAT and PAL exemptions

  • Exchange Control concessions

• Strategic Development Project (SDP) Status

Projects recognized under the Strategic Development Projects Act may receive:

  • Significant tax exemptions

  • Concessions for up to 25 years

6. Employment of Foreign Nationals

  • Foreign employees may work in Sri Lanka only where specialized expertise is required.

  • Employers must secure:

    • Employment visas

    • Work permits where applicable

  • VISA compliance is mandatory for all foreign workers.

7. Exchange Control Considerations

Key Exchange Control requirements include:

  • Foreign ownership in certain sectors capped at 40%, unless BOI approval is obtained.

  • All capital inflows must be documented through the SIA.

  • Repatriation of capital, profits, and dividends is permitted upon compliance.

  • Non-compliance may result in penalties or repatriation restrictions.

 

Foreign corporations can operate successfully in Sri Lanka with the right structure and regulatory compliance. Given the sector-specific restrictions, exchange controls, and procedural requirements, foreign investors should consult qualified legal, tax, and investment advisors to navigate the Sri Lankan regulatory environment efficiently.