Condominium woes of developers, buyers

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The construction industry is considered a barometer of a booming economy. In Sri Lanka, the recent economic downturn has devastated many economic activities and one badly impacted is the construction industry.

The condominium market, which was booming until recently, is facing a crisis due to construction cost hike in recent months. While some of the major companies try to absorb a substantial share of the price hike, some developers attempt to pass on the entire increase to unsuspecting buyers. Although it is reasonable to demand that some of the buyers– especially those who are employed overseas and those who are commercial buyers who purchase flats for resale and as an investment — should pay at least a part of the cost increase, those who purchase flats as a place of residence should be exempted from any additional charges.

Many commercial dealers and foreign employed Sri Lankans decided to invest in condominiums to take advantage of the upswing in the condominium market in Sri Lanka before the Covid pandemic and the economic recession. The Condominium Management Authority (CMA) stated that the absolute rate of growth of condominiums during the past decade is 34%, while it has increased by an unprecedented 64% in 2017 alone, compared to 2016. This was applicable to all three types of condominiums, i.e. super-luxury, luxury, and semi-luxury.

The signal given in 2017 was of a boom in the construction industry. According to the certifications issued by Condominiums authority, it was considered the expectant boom would find a popular solution to the growing housing demand in Sri Lanka, owing to land scarcity, high land prices, and high population density in urban areas.

Demand outstrips supply

By 2016, the demand outstrips supply and many investors and traders move in to make quick money. However, with increasing number of flats available in the market, demand started to drop. In the near future, there will be about 5,000 apartments in the market.

However, developers faced severe construction issues with the economic downturn and price hike since the last quarter of 2021. The Home Land, a giant among developers urged buyers to understand the current crisis and cooperate with them by sharing the price hike. In a letter to buyers who signed contracts with Home Land, the company warned them not to be misled by false information spread by some persons with hidden motives and agendas.

Devaluation

It is a fact that such negative comments on social media platforms about a housing project will result in drastic devaluation of the property, discredit the brand name of the project and depreciate the value of the condominium.

One such false news circulated in the said forum was the existence of a legal case against Home Lands being handled by an industry-leading legal firm regarding one of our landmark projects – Treasure Trove Residencies in Borella. The Home Land pointed out that this project was successfully completed and handed over to all homeowners three years ago and there were no issues as mentioned. The circulated information via the unsolicited social group was aimed to mislead customers.

The condominiums developed by premier reputed companies experienced a significant property value appreciation due to quality standards and the novel living concept of the projects. Some of them have witnessed a value appreciation of over 300% in just three years. This value is expected to appreciate further. Most developers sought to increase the prices though initially they had assured to contacted buyers that any cost hike would be borne by the company.

Some premier developers, while hiking the instalments offered more facilities to offset the increase in payments. In view of the current electricity cuts due to power crisis, they offered full backup generator to all the project units. Other additional facilities offered were a fully equipped sauna room and steam room and VIP lounge for visitors.

The new features added by developers included underground power cabling system instead of the overhead power cabling system, upgrading underground sewer treatment plant and special boosters to enhance the mobile bandwidth of every apartment unit.

With the economic downturn and shortage of material, the entire construction industry and most developers were faced with challenging times and some of them stopped work abruptly and offered investors refund payments due to the inability to continue construction. However,  established developers did not shirk their responsibility and decided to complete the projects.

Some projects faced environmental issues with the upward trend in both the number of condominiums and housing units. The total number of condominiums built in Colombo during the past decade is 727, and constitutes a total of 12,643 units. With that there is an alarming increase in the number of complaints of alleged environmental malpractices; these include sound pollution, insufficient space to dispose garbage, improper mechanisms of waste disposal, and using drinking water to wash vehicles.

Hence, there is a demand for strict laws to ensure the developers pay attention to adopting good environmental management practices in condominiums.

By Sugeeswara Senadhira