Property lawyers or agents in the industry assist buyers and sellers with the legal aspects involved in purchasing a property. As a buyer, working with a trusted lawyer would mean that it reduces your chances of being scammed by fake sellers. But when you are selecting a lawyer, it is important to consider his or her experience and specialty or ask for recommendations from a trusted friend or family.
Appointing a lawyer earlier on in the property buying or investing process may help you with;
When buying property in Sri Lanka, besides the capital amount that you pay, you need to bear stamp duty charges, lawyer’s fees, and bank charges. These charges will vary based on the property, your lawyer, and whether it is a lease or purchase.
A lawyer will typically charge 1% - 3% of the amount if the property is obtained under a lease or purchase for documentation.
When selling property 3% from the first Rs.100,000 value of the value of the real estate, and 4% for the balance should be paid as stamp duty. When leasing a real estate property, the stamp duty charge is 1%, but if the lease period exceeds 20 years, duty should be paid only for the first 20 years. In terms of lawyer fees, 1% to 3% of the value should be paid and this is generally paid by the buyer/lessee.
Property purchased through a mortgage loan is subjected to bank charges in the form of interest and other costs that vary based on banking policies. Generally, the interest rate for a mortgage loan varies between 7% to 12.5% and can be repaid within a period of 5 to 30 years depending on your repayment ability, age, and other factors considered by the bank.
Land might be available everywhere, but not everyone charges the same price, nor do they reveal the real price.
When purchasing a product from the store, it is easy to compare between brands and their prices. But when purchasing real estate in Sri Lanka, the information available is limited. Because of this, you would never know whether you are paying what your land is worth, whether it is the normal market price or whether you are being convinced otherwise.
To create a benchmark for your budget and gather information on the average property prices, accessing features like the Sri Lanka House Price Index can help a lot. The index page includes information on the average prices of property including apartments, houses, lands, and commercial buildings. It also provides pricing information specific to a quarter, a region, and the cities
If you’re purchasing a condominium, signing a Sales and Purchase Agreement (SPA) symbolizes that you will purchase the property from the seller and that similar agreements cannot be signed with third parties later on.
This agreement shall include;
The SPA should also include the details on when the contract can be terminated, reasons for termination, penalties, etc. For new developments, the seller’s lawyer prepares the document and offers it free to the buyer. It's common for the buyer to pay a deposit to the seller’s lawyer when signing the agreement.
The sale of a property will be completed only after all the legal paperwork and payments are done. This includes the title deeds, history of the ownership, proof of the absence of legal disputes related to the property, survey plans, building line certificates, street line certificates, certificates of conformity, and documents to show payments of taxes and local rates having paid. Check the validity of each of these documents with a lawyer and confirm their authenticity.
The final transfer of ownership and title takes place through the Deed of Transfer (DOT). For new developments, the seller’s lawyer prepares this document and offers it free to the buyer. The seller also offers an updated version of the survey plan with the DOT to register the property title with the buyer’s name in the land registry. A public notary notarizes the change in ownership and confirms the transfer. Here the seller’s lawyer or the buyer’s lawyer can also act as the public notary without the involvement of a third party notary.
As the buyer, you don’t necessarily have to be present at the signing of the DOT. It's the seller that signs it in the presence of the lawyers and two witnesses and your agent/lawyer may work by settling payment balances, estate agent fees, etc. He will also receive the keys of the property and title documents on your behalf and register the DOT while notifying the local council or municipality of the change in ownership. Finally, once the registration is completed, you will receive the Registered Deed of Transfer from the Land Registry. However, both the buyer and seller shall be at the same place and time when signing the Deed of Transfer under Title Registration of Bim Saviya.
What matters is that the building construction shall be in line with the building plan without being deviated from plan. Otherwise, the local authority may not approve your construction and it may become an unauthorized construction.
Learn more about what you need to get building approval and the regulations to follow when constructing your building through our article 8 Things to Follow to Get Your House Plan Approved by the Municipal Council.
To build your dream home in Sri Lanka you can either choose to work with individual contractors or reputable house builders who offer a range of services from designing the plan to finishing the construction.
The services offered by these builders may vary based on the experience they have in the industry and the niche they cater to. When selecting one for the construction project we recommend you to consider details such as the cost you are willing to spend, the time you’re willing to invest, the complexity of the design, the location of your property, the quality of the previous projects done by the builder and other details that could impact the overall design and construction of your home.
When buying already built property in Sri Lanka, one of the biggest limitations is that the room to customize is minimal. You might be able to rearrange the furniture and change the decor, but the layout and the features of the house can’t be adjusted. However, when building your own house, you can choose what you want to include, how you want to include them and where you want to include them.
To build a low-cost house in Sri Lanka, you need to consider 3 main factors;
Learn more on the steps to follow under these 3 factors by watching our webinar How to Build a Cost Effective House with Chinthaka Dayaratna Managing Director of C Plus Design (Pvt) Ltd
CGT on the realization of an asset was introduced by the Inland Revenue Department with effect from 01/04/2018. According to this, a rate of 10% will be applicable on gains from an investment asset ( eg: land of the building). The capital gain is calculated as the net of the consideration received minus the cost and liability of the asset at the time of realization. For any land or building acquired or gifted on or before 01/04/2018, the cost of the asset shall include the value of the asset as of 30/09/2017.
However, the following exceptions shall also be applicable;
Read more about CGT from our article Capital Gains Tax in Sri Lanka and its effect on property.
According to Sri Lankan law, foreigners aren’t allowed to purchase land in the country. However, it can be leased out to them for up to 99 years. If the land is to be bought, they can only do it through a company formed in Sri Lanka with payments being made from a bank account opened under the company’s name.
For this, you need to open up bank accounts in a local bank to maintain everyday living funds and pay for the property purchase. If the property is being purchased through the company, then the account should be opened under its name. This process identifies the foreigner’s property as an investment to Sri Lanka rather than a mere purchase.
An inward investment account (IIA) is the special bank account offered by international and selected local commercial banks in the country for such property investments. Transacting through this account for your property investment would mean that remitting funds to overseas can be done easily.
To set up an IIA;
But if you're purchasing a condominium, there are exceptions. Before the government changed the law, they only allowed foreigners to purchase condominiums above the 3rd floor. However, with the recent changes foreigners can now purchase apartments on any floor in any part of the country on a cash basis.
Further details can be found on our guide to buying property in Sri Lanka for foreigners and expats
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