By: Staff Writer
July 28, Colombo (LNW): Sri Lanka’s real estate sector is showing strong signs of recovery in 2025, driven by a stabilising economy, improved access to credit, and increasing demand across key suburban and urban areas. According to the Real Estate Market Outlook Report 2025 (REMOR25) released by LankaPropertyWeb (LPW), investor confidence has returned, setting the stage for sustained growth in the property market.
One of the clearest signs of this revival is the significant surge in land prices, particularly across the Western Province. The report highlights a 12% year-on-year (YoY) rise in average land prices in the region. Suburban areas are leading the trend, with Colombo district’s outer zones experiencing up to 20% price growth. Specific suburbs such as Piliyandala saw a 16% increase, while Athurugiriya and Homagama recorded 14% growth, pointing to a growing preference for well-connected but less congested locations.
In contrast, central Colombo (Colombo 1-15) experienced a moderate 7% price increase, indicating a shift in investor interest from the city core to developing suburbs. Additionally, southern coastal lands are gaining popularity, fetching around Rs. 2 million per perch, supported by rising tourism and overseas interest.
The apartment sector is also stabilising after years of volatility. In 2025, apartment sales prices rose modestly—urban areas between 0.2% and 2.8%, and suburban zones up to 2.9%. Rental prices, especially in high-end categories, remain steady. With an existing inventory of 37,000 units and another 8,200 expected by 2027, supply remains high, but demand, particularly for three-bedroom units, continues to hold strong.
A key driver of this demand is the return of overseas buyers, who now account for 27.7% of LPW’s search traffic. Their interest is largely spurred by Sri Lanka’s relatively low square foot rates (when calculated in USD) and increased economic stability. Properties in Colombo 1-15 now start at Rs. 60 million, while houses in emerging suburbs begin at around Rs. 20 million, offering buyers greater affordability and value.
Another major factor fuelling growth is the improved availability of home financing. Following a 7.75% reduction in the Central Bank’s Overnight Policy Rate, commercial banks now offer home loans at approximately 10%, making property purchases more accessible for middle-income earners and revitalising buyer interest.
LPW Managing Director Daham Gunaratna noted that over the past year, 25 new developments were launched, 2,500 new units entered the market, and previously stalled projects have added 3,600 units post-completion. This upward momentum signals the real estate sector’s entry into a new growth phase marked by stability, cautious optimism, and a renewed appetite for long-term investment.
