Investments on apartments and condos
While going through the Hit Ads section of the Sunday Times, I observed that the amount of advertisements for sale and rent of apartments and condos has sharply increased during the past 10 years.
These apartments are being built by investing large amounts of funds in billions of rupees and due to the high price of these apartments the sales have been declined, since there are many repeat advertisements in papers.
In 2008 till 2012 the US mortgage credit bubble burst unexpectedly due to granting of excessive credit for home loans, which finally ended up creating a serious financial crisis in the US economy. This trend continued till about 2012 which later affected the global economies due to the global financial crises.
During this period many banks and lending institutions crashed while some were bailed out by the central banks. The recovery from this mortgage loan crisis was not that easy for many countries.
In Sri Lanka in 1989, HPT crashed and subsequently many financial institutions failed and crashed in our country due to mismanagement and credit crises. This situation is yet to be resolved by the Central Bank.
The main objective of this letter is to caution that we too may face a similar property investment crisis considering the rate of construction of such apartments investing billions of rupees, some borrowed from banks, others by way of customer advances.
In this connection I feel it is high time that the state must intervene and bring about regulations limiting such investments while encouraging such investors to invest in other productive assets based projects like factories, etc for export purposes offering tax concessions etc.
Mahinda Wimalasena
Kiribathgoda