By:Staff Writer
August 12, Colombo (LNW):Once dismissed as incompatible with Sri Lankan lifestyle traditions, apartment living has emerged as one of the country’s most dynamic real estate segments, reshaping Colombo’s skyline and delivering substantial returns to investors. Over the past two decades, the sector has grown in tandem with GDP expansion, urbanisation, and improved living standards — overturning the long-held belief that Sri Lankans would never trade gardens for high-rise living.
The most transformative period came in the aftermath of the peace dividend, when residential towers began sprouting across Colombo and into its suburbs. Today, the city has around 14,000 tier 1, 2, and 3 apartment units, with another 2,566 under construction. Suburbs add more than 9,000 existing units and over 3,000 nearing completion. Yet, market appetite remains far from satisfied.
Despite six years of economic turbulence, apartments have held their value better than most asset classes. Strong capital gains have been fuelled by steady tourism growth, demand from the diaspora, increasing urban migration, and a rising “buy-to-live” segment seeking convenience and affordability.
The post-COVID tourism rebound has also lifted rental yields, with booking platforms enabling apartment owners to compete directly with hotels. A pause in new construction between 2019 and 2023 created a supply crunch, driving absorption rates up and prices higher. Investors who bought just before the sovereign debt crisis have since seen significant returns, even after currency depreciation — in some cases posting gains in US dollar terms.
Location remains a key driver for buy-to-live buyers, with proximity to schools, hospitals, workplaces, and transport hubs essential. Developer reputation and build quality are also critical considerations. Certain locations, like Rajagiriya, have seen spectacular growth since being identified early as high-potential markets. Led by projects such as The Fairway Residencies, Fairway Elements, Fairmount Residencies, and Fairway Sky Garden, the area quickly attracted multiple local and foreign developers.
Current market watchers, including real estate consultancy RIUNIT, are now tipping Colombo 5 as a prime zone for rapid apartment expansion, with rising location popularity expected to deliver strong investor benefits.
With a 22-year track record, RIUNIT forecasts continued growth in high-end apartments, underpinned by favourable demographics, rising middle-class incomes, and a tourism sector that is once again on the upswing. Compared with regional peers, Colombo still has a low house-to-apartment ratio, suggesting significant room for long-term development.
RIUNIT CEO Roshan Madawela notes that governments worldwide have leveraged real estate as a growth engine — with Dubai’s property boom making it the largest GDP contributor during its development surge. He argues that Sri Lanka’s real estate sector, if nurtured, can boost financial stability, the construction industry, and tourism.
Citing success stories from destinations such as the Seychelles, Thailand, Bali, Spain, and the Caribbean, Madawela urges policymakers to incentivise mid-range housing developments to address supply gaps. “Instead of stifling the real estate market,” he says, “we should enable it to become a cornerstone of national economic growth.”
