Real estate stockmarket

Within the next three to four months, Sri Lanka will see a ‘Real Estate Stock Exchange’ backed by a National Pricing Index (NPI) for the real estate industry. “We have submitted a paper in this regard to the Engineering and Construction Ministry and the government has given the go ahead to work on it,” Lakshmi Narayanan, President/CEO, REBI International, a company providing various services in the real estate sector, told The Sunday Times FT.

He said the local arm of the company, REBI Sri Lanka, which was launched on Monday, is currently working on the NPI for Sri Lanka. “We are in the process of developing a NPI for the real estate industry in Sri Lanka. We have already delivered a formula for the Indian market,” he said explaining that a NPI is a necessity because present valuation procedure in the country does not have a standardisation.

He said that when real estate becomes a commodity, it will easily be tradable. “Eighty percent of Sri Lanka’s land is owned by the state. The government has realised that they need to get involved to make this a reality,” he added.“Many often consider the last pricing of a land in the locality. It ultimately becomes more of an ‘emotional valuation than a real valuation,’ he explained further.

Narayanan said that there is an increasing trend of ‘puffing up’ property prices in Sri Lanka. “If a person who owns many properties in the same locality and wants to sell them, he may create an artificial valuation and make sure his acquaintances (in most instances) buy one and thereby create an artificial valuation for his property,” he explained, Narayanan said that property prices currently grow at 24 to 25 percent per annum.