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How to Find and Buy the Right Property in Sri Lanka?

How to research for property

Whether you are a local or a foreigner, when purchasing a property in a particular country, there are a set of laws and regulations to abide by. It also helps to know the ins and outs of selecting a property to be able to make the best purchase.

In Sri Lanka, the property is generally well placed throughout the island. They are surrounded by natural landscapes, amenities, and infrastructure of every kind.

The country has 9 provinces and 25 districts; with its metropolitan city of Colombo subdivided further into 15 parts, there is a range of real estate to choose from for investing in. Some cities with properties in high demand are Colombo, Gampaha, Kandy, and Galle. However, when you are selecting these cities, you need to think of what you expect from the new investment. If it’s for a vacation home, cities like Kandy or Galle are ideal because of the rich natural resources and relaxing vibe.

When choosing amongst the property in these cities, you could either work with a real estate agent or go through the newspapers or take the fast track with LankaPropertyWeb. With LankaPropertyWeb you can filter your search based on what you are looking for and locate your dream home in minutes. When selecting lands to build property in; consider its location, the access to utilities and facilities, zoning requirements, average plot prices, etc. These may impact your future and your daily life once you have built your home on it.

However, when purchasing an apartment, the requirements to consider are different.

Getting insight into an apartment before you purchase it helps you select your Ideal Home easily. It also gives you an idea of how you can plan out your financing options. Here are a few factors to address in the process.

The completion date and payment plan (if it is under construction).

Availability of the necessary documents and approvals for the development stage they are in.

If the property is mortgaged to a bank, the impact of it on the issuance of deeds.

The reputation of the developer and contractor.

The availability of infrastructures, common facilities, and roads as per the Plan

Understand the average prices in the area (how to use our tools)

Research the market and make sure the property you have chosen is the correct one in terms of value and location. You can use tools such as the House Price Index, Area guides, ROI Calculator, and price comparisons between different ads to assist you in selecting the best property.

Through our area guide, you can learn more about the particular city and what it is surrounded by. It helps you find the ideal property close to a selected school, university, or workplace.

The House Price Index designed by LankaPropertyWeb provides information on the average property prices in Sri Lanka, covering overall 9 provinces, and Colombo as well. Information can also be compared between different quarters of different years to find the fluctuations in property prices.

Knowing the average prices finding a property in the most favorable areas will ensure that you get your value for money.

Investing or Living?

Property as an investment has always been recognized as a guaranteed source of income. Whether you live in it and earn from appreciation or purchase and give it out on rent, the returns you’ll be able to enjoy depend on the nature of your property in itself. That is why we recommend you to calculate your return first before making an investment in a property.

Return on Real Estate Investment

This is the percentage of return a real estate investor can gain after deducting the related expenses of the investment. Return comprises of two elements. The first one is the capital gain which is the value appreciation of the property during the holding period you get when you sell the property. The other is the income generated during the period (rent income). To calculate the ROI, deduct the expenses you have incurred during the holding period such as insurance premiums, management fee, maintenance expenses, interest paid (if the property is bought on a bank loan), etc.

The LankaPropertyWeb ROI Calculator has been designed especially for this and using that you can find your returns faster and easily. To find out more about how you can calculate your return read our article on LankaPropertyWeb Tools: Learning how to use the LPW ROI calculator.

How to find a property with the best ROI

Property ROI mainly depends on two key elements, the first one is the value (capital) appreciation of the area and the second one is the generatable income of the property. For example, in the Colombo 03 area, property value appreciation is around 5-6% whereas if you invest in a 3-bedroom decent apartment in the same area you may rent it and earn about LKR 250,000 as of the monthly rental income. The income you earn from a property can vary depending on several factors. To find the best property that is worth an investment, it is advisable to consider the property value appreciation rate of the area and the income that can be earned from the property. Value appreciations are mostly linked with the scarcity of supply, higher demand, infrastructure developments, etc

Guide to buying property in Sri Lanka for foreigners and expats - 2025

What are the rules and regulations for expats and foreigners buying and renting property in Sri Lanka ?

Foreigners can buy apartments / condominiums from ground level up, however lands cannot be purchased on freehold and can only be leased up to 99 years. A condominium is defined as a group of residences with shared facilities. The condominiums can be purchased provided that, the entire value shall be paid upfront through an inward foreign remittance prior to the execution of the relevant deed of transfer.

Any private company with minority (Upto 49%) foreign ownership can buy or lease property in Sri Lanka.

Under the current legislations, a foreigner can get in to the property market using the following options:

a)   By leasing the property
b)   By inheriting
c)   By a gift from parents
d)   Part of a private company with a local shareholding of above 50%
e)   As a part of a locally listed public company
f)   Buy an apartment / condominium (any floor)
g)   By obtaining Dual Citizenship

How to set up a Private Limited Company in Sri Lanka

Foreigners may establish private companies in Sri Lanka, subject to various restrictions and rules. The following are the usual steps for a foreigner to establish a private business in Sri Lanka to purchase land:

Get all required permits and approvals: Before beginning the process of forming a private business in Sri Lanka, it is critical to secure the appropriate permissions and approvals from the relevant authorities. Obtaining a business visa, registering with the Department of Registrar of Companies, and receiving clearance from the Board of Investment (BOI) if the investment exceeds a particular level are all examples of such steps.

Choose a company structure: There are various business formats available, including sole proprietorship, partnership, and private limited company. Because it provides limited liability protection, a private limited company is the most prefered structure for foreign investors.

Register the company: After deciding on a business structure, the firm must be registered with the Department of Registrar of Companies.

Create a bank account: After the company has been registered, a bank account in Sri Lanka in the company's name must be opened. This is required for the purchase of land.

Get the appropriate land permits: Foreigners are prohibited in Sri Lanka from holding certain types of land, such as agricultural property. As a result, it is critical to check that the land being purchased is eligible for foreign ownership. The company must also secure the essential permits from the appropriate authorities.

Acquire the property: The corporation can proceed with the land purchase once all of the relevant permissions and approvals have been received.

It is vital to note that forming a private corporation and purchasing land in Sri Lanka can be complicated and time-consuming. Foreigners should seek the help of a local attorney or business consultant who is knowledgeable about the regulations and can guide them through the procedure.

At LankaPropertyWeb, we provide a valuable Buyer and Seller Assistance service to help anyone who is interested.

For more information on how to set up a business in Sri Lanka, refer to our comprehensive guide here .

Buying land

Foreigners cannot buy land as sale of land to foreigners has been prohibited from the 2013 budget. Land can only be leased out for a max of 99 years. Foreigners or companies (with more than 50% foreign ownership) no longer need to pay the 15% land tax from 1st Jan 2016 (LAND (RESTRICTIONS ON ALIENATION) (AMENDMENT) - issued 2nd Sept 2016)

VAT on apartment sales

A 18% VAT is payable on any apartment bought on the primary market (i.e. from the developer). VAT on apartments was reintroduced in Jan 2023 with a 15% tax, which was increased in Jan 2024 to 18%. In addition to VAT, a 2.5% SSCL tax is also payable by the buyer to the developer.

Taxes for Property

There is a 1% Stamp Duty for leasing land up to 99 years.

If buying a property, there will be a 3% Stamp Duty on first LKR 100,000 and 4% thereafter. A lawyer will typically charge 2-3% for preparing the documents.

Taxes for landlords

Anyone leasing out a property to a foreigner or local will need to pay a 1% stamp duty when the rent is collected.
VAT is payable if the lease is to a VAT Registered person, other than on residential premises. Further, the sale of land & buildings other than residential premises will also be liable to VAT.

Capital Gains Tax (CGT)

The Capital Gains Tax of 10% on the gains (profits), will become effective from 1st April 2018. It will be a flat 10% rate irrespective of the period of ownership. The tax will be applicable to both foreigners and locals. For any assets owned/bought prior to April 1st 2018, then the value of that asset will be calculated as at 30th September 2017. Any gains of less than Rs. 50,000 will not be subjected to CGT and if the property being sold has been your principle place of residence for 2 of the last 3 years, then CGT will not be applicable. If you renounce residency in your country and become a resident in Sri Lanka, then CGT will need to be paid on the investment property in your former country. You can find out more on Capital Gains Tax from here.

Residency Visas

The newly introduced Investor Visa program allows non-Sri Lankans to obtain visas by either purchasing or showing that you’re currently in the process of completing the purchase of an apartment. The Investment amount must be deposited into an Inward Investment Account (IIA) at a local bank before making the visa application.

Investors investing USD 200K or more will receive a 10-year residency visa, while a USD 100K investment will qualify for a 5-year residency visa. Both visas are renewable. To get more details on the requirements and process, please visit our section on ‘Investor Visas for Real Estate Investment’ article.

Can foreigners obtain a mortgage/loan?

Foreigners cannot still obtain a mortgage from local banks, however dual citizens and non-resident Sri Lankans are able to. Please Contact us if you would like to get any assistance with applying for a mortgage.

Do foreigners need to pay a 100% or 15% extra tax?

No, there are no additional taxes for foreigners. The 15% tax on land lease for foreigners was removed under the amendment to the Land (Restrictions on Alienation) Act, No. 38 of 2014 effective from 1st Jan 2016. The 100% tax on foreigners buying land in Sri Lanka was removed under the Land (Restrictions on Alienation) (Amendment) Bill, which was passed in October 2018. This amendment repealed the previous restrictions that were imposed by the Land (Restrictions on Alienation) Act, No. 38 of 2014. Thereafter foreigners cannot buy lands and can only lease them.

Moving money in and out of the country

If a foreign resident wants to purchase a property, then the money will need to be channeled in to the country via a special SIA (Securities Investment Account) - which are now called Inward Investment Accounts (IIAs), held at a local bank. Once the property has been sold, the money can be taken out (plus any gains) via the same account in the currency that the money was deposited in. If you currently own a property where the money hasn't been brought via a SIA account (eg. inherited, bought while a citizen of Sri Lanka), then there's an annual limit of $20,000 when taking the money out of the country. You could still take the money out at once, if the source of the money can be proven to the bank and Central Bank (this whole process will take a few months to complete).

The government will allow $45,000 to be brought in to the country without declaring the source (Budget 2017)

The budgets of 2017 & 2018 have proposed that foreigners be allowed to borrow money from local banks for the purchase of condominiums (up to 40%).

Can You Buy Land in Sri Lanka as a Foreigner?

The Sri Lanka Land Reclamation and Development Corporation Act, No. 15 of 1968 and Land (Restrictions on Alienation) Act No. 38 of 2014 make provisions to stipulate restrictions on the transfer of title of any land situated in Sri Lanka.

The Land (Restrictions on Alienation) Act 2018 has made it illegal to transfer the ownership of any land located in Sri Lanka, starting from 1st January 2013, if the person or entity receiving the ownership is:

1) a non-citizen,

2) a company registered in Sri Lanka that has 50% or more of its shares owned by foreign entities, or

3) a foreign company.

Starting from 1st April 2018, it is now allowed for public companies that have more than 50% of their shares owned by foreign entities to purchase immovable real estate properties.