Mar 07, 2017 (LBO) - Sri Lanka’s real estate brokers, agents and developers need to professionalize services with the involvement of the the government to ensure future growth, industry officials said.
“The emerging and perhaps urgent need of the real state industry is for some type of regulation to be introduced in order to regulate the activities of all players in the sector including agents and developers," Roshan Madawela, chief executive of the Real-estate Intelligence Unit (RIU), said at a recent forum.
"Having a unified voice will serve to address concerns and jointly lobby the government to ensure the continued growth of this industry."
On the other hand, he says regulation is needed in order to prevent any potential failure on the part of a developer that would ultimately hurt the entire industry.
"It's better to be proactive rather than take a reactionary or reflex measures post any negative incident.”
Sri Lanka does not have a formal system of registration of certification for real estate brokers and agents or developers.
In many countries it is a legal requirement that all practitioners of the real estate business must be registered and there are legally binding responsibilities that go with the profession.
Industry experts say that as a result of the unregulated environment, it is widely recommended that a great deal of care is exercised before a landowner enters into any agreement with an agent or with multiple agents.
"Everyone should not be able to become a real estate broker, there needs to be some kind of regulation, even house wife's and three wheel drivers are acting as brokers toady," Richard Buultjen, managing director and chief executive of R B Realtors and Consultancy said.
"Most of these people don't know the correct market value of land and housing, they just want to make a quick profit. This kind of unprofessional activity can ruin the market."
Buultjens adds that it should be the same with developers.
Screening for developers
"Before approvals are given for developers, their capabilities should be screened, mainly for funding, most of these projects depend on pre-sales to fund the construction. This is a risk for the buyers because if they cant sell the apartments the project will not be completed."
Sri Lanka's apartment market has grown through leaps and bounds with the number of luxury apartment units in the market expected to reach 6,000 units by 2018-19, from 2,657 units in 2015.
In the Sri Lankan context, RIU said in a recent report that landowners work with multiple brokers and that this approach can be problematic.
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"Appointing a single entity/broker is advisable as the ideal broker for such properties will know where to pitch and whom to contact even without advertising,"
“However, the landowners may be advised to place a time-limit on the period of exclusivity. If the agent fails to deliver within that stipulated time, the owner can consider his options with more agents.”
As a market that still lacks maturity, Sri Lankan brokers do not charge upfront fees from landowners and they also do not charge fees from the buyer, unlike in India for example.
The standard commission payable by the sellers is three percent of the deal price in the case of residential properties.
On occasion, if the price of the property is very high, the rate can be negotiated down to around two percent, the report added.
Sri Lanka’s real estate industry calls for more regulation
