Frequently asked questions from Helandiva Realty (pvt) Ltd
Welcome to our FAQ section dedicated to our comprehensive real estate solutions. Here, you'll discover answers to commonly asked questions about documentation, land investment, and the purchasing process in Sri Lanka.
What is the property buying process in Sri Lanka?
- Before buying a property, it’s essential to perform thorough due diligence. This involves verifying the title, confirming ownership, and checking for any legal issues or disputes concerning the property.
- Once a suitable property is identified, an Agreement of Sale is prepared, detailing the terms of the purchase. A deposit, typically around 10% of the price, is usually paid at this stage.
- Next, a title search is conducted to ensure the property is free from any legal claims. Once confirmed, the property can be transferred to the buyer’s name. The buyer must also pay stamp duty, a tax on the transaction, and the transfer is registered at the Land Registry to finalize ownership.
- The process concludes with the notarization of the Deed of Transfer, where both the buyer and seller appear before a notary public to legally transfer ownership.
How can I sell a property in Sri Lanka?
- When selling a property, it’s important to determine if the timing is right and the market is in your favor. Research or consult with your agent to set a reasonable price. Without proper research, you risk overpricing the property, causing it to stay on the market longer than desired, or underpricing it, which could mean losing out on potential earnings.
- Once you’ve settled on a price, it’s time to showcase your property to potential buyers. You can host an open house, allowing multiple buyers to visit in one day, or schedule individual showings. For the latter, ensure the property is clean and tidy, and give the buyers space by leaving while they view the home.
- After finding a buyer, the next step is to finalize the paperwork. This includes a buyer-seller agreement outlining the responsibilities of both parties, as well as signing any legal documents necessary for the property transaction.
What do I need to rent property in Sri Lanka?
- When renting out a house, it is the landlord’s duty to ensure the property is in excellent condition. This includes repairing any damages, repainting, decluttering, and removing personal valuables to make the space livable and appealing.
- To maintain a positive relationship with the tenant and avoid conflicts during the tenancy, it’s essential to draft a clear rental agreement. This contract should outline the terms and conditions for both parties, including details about advance deposits, key money, and any fees for damages.
- Finding the right tenant depends on your specific preferences and standards. To attract suitable candidates, advertise strategically, set clear tenant criteria, screen applicants carefully, and invest in professional photography and well-crafted listings.
What is a perch of land in Sri Lanka?
A4: In Sri Lanka, land is measured using the perch. One perch equals 25.29 square meters or about 272.21 square feet. For bigger areas, like an acre, 1 acre is equal to 160 perches, 4 roods, or 4,000 square meters.
What is the real estate agent’s fee?
The real estate agent’s fee, typically ranges from 3% to 5% of the property’s value and is usually paid by the seller. If the agent also acts as a buying agent, a buyer’s fee may apply. It’s important to clarify from the beginning whether the seller, buyer, or both parties are responsible for the agent’s fee.
What is Capital Tax Gains?
- The Inland Revenue Department introduced CGT on the realization of assets effective from April 1, 2018. A 10% tax applies to gains from investment assets, such as land or buildings. The capital gain is calculated by subtracting the cost and liabilities of the asset from the amount received upon its sale. For land or buildings acquired or gifted before April 1, 2018, the asset’s value as of September 30, 2017, is included in the cost.
- The only exceptions to CGT are when Sri Lankan residents with gains under LKR 50,000 from a transaction, when selling a primary residence if the owner has held the property for three years and lived in it for two years within that time or when the property is transferred to spouses, ex-spouses, charities, or the government.
Can I get someone else to enter the agreement for me?
- You can entrust someone else to act on your behalf by granting them Power of Attorney, a legal document that allows another individual to make decisions regarding your assets, finances, and real estate. This authorization ensures that your affairs can be managed even when you’re unable to do so personally, providing flexibility and convenience in handling important matters.
- There are two forms of Power of Attorney. The first is the General Power of Attorney, which grants broad authority, including rights to sell, lease, or sub-lease property. The second is the Special Power of Attorney, where the person is given only specific rights for a particular task, ensuring that the authority granted is limited to a defined purpose.
How do I check the legality of the documentation?
- It’s essential to seek the assistance of a solicitor or attorney to ensure that your transaction is entirely legal. Their expertise helps safeguard your interests and ensures compliance with all necessary laws.
- The solicitor or attorney conducts the legal due diligence process, verifying the authenticity of the documents and assessing whether everything is in proper order. This step is crucial in avoiding future legal complications.
Is Value Added Tax (VAT) applicable on property sales in Sri Lanka?
- For new apartments purchased from VAT-registered companies, an 18% VAT is imposed on the full sale price, an increase from the previous 15% as of January 1, 2024.
- Developers are responsible for collecting and remitting this tax to the government. However, if you buy an apartment from an individual who is not VAT-registered in the secondary market, VAT may not apply, which can make such purchases more attractive. Additionally, VAT is not charged on residential properties if the buyer is not VAT-registered, while the sale of land and non-residential buildings is subject to VAT at 18%.
Can non Sri Lankan citizens buy property in Sri Lanka?
- Foreigners can buy apartments or condominiums on any floor, but they cannot purchase land outright. Land can only be leased for up to 99 years. Condominiums, which are buildings with shared facilities, can be bought as long as the full payment is made upfront through an inward foreign remittance before the transfer deed is finalized.
- Under current regulations, foreigners can enter the Sri Lankan property market through several methods. They can lease property, inherit it, receive it as a gift from parents, or invest in a private company with up to 49% foreign ownership. They can also buy property through a locally listed public company or purchase an apartment or condominium. Additionally, obtaining dual citizenship is another option for property ownership.
How can a foreign resident transfer money to Sri Lanka to purchase a property?
- If a foreign resident wishes to purchase property in Sri Lanka, the funds must be transferred into the country via a special Inward Investment Account (IIA), previously known as a Securities Investment Account (SIA), held at a local bank. After the property is sold, the funds, along with any gains, can be withdrawn through the same account in the currency in which they were originally deposited.
- For property already owned where the funds were not channeled through an IIA—such as inherited property or property bought while a Sri Lankan citizen—there is an annual limit of $20,000 for withdrawing money from the country. It is possible to withdraw a larger amount, but this requires proving the source of the funds to both the bank and the Central Bank, a process that can take several months.
- The government permits bringing in up to $45,000 into the country without declaring the source, as outlined in the 2017 Budget. Additionally, the 2017 and 2018 Budgets proposed allowing foreigners to borrow up to 40% of the purchase price from local banks for condominiums.
How do I make an initial offer?
- Your real estate agent will guide you through the process of making an offer on a property. This offer should include a complete legal description of the property, the amount of the down payment, and the financing terms. Additionally, it should specify the proposed move-in date, the offered purchase price, and the proposed closing date. It’s also important to include the length of time the offer remains valid and any additional details pertinent to the deal.
- Remember that securing a property successfully involves negotiating a satisfactory contract with the seller, not just making an initial offer.
How do I advertise my property?
You can list your property for sale or rent through Helandiva Realty for a fixed fee (terms and conditions apply). Click here to submit your property details, and we will get in touch with you within 24 hours.
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