By Lanka Property Web
With the recent changes in the law welcoming expat Sri Lankans to purchase property in the country, LankaPropertyWeb interviewed Attorney at Law Saminda Jayasekara regarding the feasibility of this option and the barriers to overcome in the process.
As a local, there are no restrictions on purchasing property in the country. Whether it is owning a land, apartment or investing in a commercial property, you have the liberty to select among a range of options available in the market.
However, as a foreigner, there are certain restrictions. While the option of purchasing a residential or commercial condominium property is available, with lands they can only be leased out for a period of 99 years.
But what about an expat?
“The main consideration when purchasing property is whether you are a citizen of Sri Lanka or not. If you are a citizen, then you can purchase properties as you wish, otherwise there are some restrictions,” said Attorney at Law S. Jayasekara.
The reason for this is that if the expat in concern has given up citizenship in Sri Lanka completely, then he or she is considered as a foreigner or a non-citizen according to the law. Under this situation, the laws that are applicable to the individual also vary.
The Land (Restrictions On Alienation) Act No. 38 of 2014 prohibits the transfer of the title of any land in Sri Lanka to a foreigner, to a company incorporated in Sri Lanka under the Companies Act (foreign shareholding in such company, either direct or indirect, is 50% or above) or to a foreign company.
However, at the same time, there are exceptions as well.
In terms of the Apartment Ownership Law, a previous report published by LankaPropertyWeb defining the ABCs of investing in Sri Lanka highlighted that in the past foreigners had to face floor restrictions with purchasing condominiums. But as of 2018, this law has been revised opening doors for them to buy any apartment on any floor and invest in the country in top developments. However, the only condition is that the foreigner has to pay for the consideration in full before the title transfer and that consideration must come from abroad via an Inward Investment Account.
The Inward Investment Account (IIA) is a special account designated for eligible investors, resident in or outside Sri Lanka to route funds to invest in the permitted investments. It can be opened in LKR or a foreign currency or held jointly by eligible investors.
On the other hand, if a foreigner becomes the owner of a land through a deed of gift or devolves under a last will or without a last will, under the succession law in Sri Lanka the restrictions mentioned previously will also become null and void.
These exceptions are applicable to dual citizens as well, with the logic that they are still Sri Lankans while holding a nationality in another country.
When making a purchase for a property, payments should go through this account. Upon signing the deed of transfer and handing over the possession of the property, you will be able to claim ownership for the development.
“You can open up an IIA in Sri Lanka while you are in your country, and for that you can contact your realtor or the developer. But if you are living outside of the country, you can appoint an agent with a special power of attorney mentioning ‘only for the purchase of a property’,” said Saminda.
The power of attorney is a legal document giving one person, the agent or attorney-in-fact the power to act for another person, the principal. This document has to be registered in the relevant land registry of Sri Lanka and can be used in the process of purchasing any property.
The reason for this is that according to the local laws the purchase of a property in the country should be done in the presence of a licensed notary public and two or more witnesses present at the same time.
As an expat, a Sri Lankan lawyer should be contacted to draft a foreign power of attorney. The documents should then be signed before the Sri Lankan ambassador or a lawyer in that country. Once he couriers the duly signed document, the lawyer in Sri Lanka could file it in the relevant land registry to complete the process.
To formally cancel this appointment the expat or his lawyer in Sri Lanka has to submit the Original Power of Attorney, Affidavit supplied by the expat, copy of the advertisement published in the government gazette in Sinhala, Tamil and English languages to the land registry where the Power of Attorney is registered. Once it's published in the Gazette, it will amount to a revocation of the authority.
The purchase of property in Sri Lanka as an expat is a great way of investing, especially given the fact that the nation is seeing continuous development in different areas. The stability of the real estate market despite the pandemic is also further evidence to this. Therefore, capitalizing on this opportunity earlier on and investing in property is seen as a prospective income source, even in the future.