Sri Lanka’s Rajagiriya takes real estate center stage
The Morning: Sri Lankan suburb Rajagiriya has been flagged as having one of the highest growth potential amongst all suburbs in the Western Province by RIUNIT Real Estate Market, due to its strategic urban proximity and infrastructure-driven transformation. Since 2014, 2000 apartment units have been added to the Rajagiriya real estate market.
Rajagiriya’s average apartment prices reached $ 183 per sqft (Tier 2) and $ 123 per sqft (Tier 3) by Q4 2024, outpacing other suburban markets like Dehiwala ($ 163 Tier 2, $ 114 Tier 3), reflecting its premium appeal. Absorption rates near saturation (97% Tier 2, 98% Tier 3) underscore demand fueled by sound infrastructure and lush greenery and a generous spread of waterbodies.
With the expected positive outlook in Rajagiriya, the developers are doubling-down particularly on the luxury apartment segment, with supply surging 135% to 503 units in 2023, which is the highest since 2014. In contrast, Tier 3 supply increased slightly less, as rising construction costs and import tariffs stifled affordable housing.
Rajagiriya’s real estate market, like many others, bore the brunt of Sri Lanka’s 2022 debt crisis, experiencing a sharp downturn amid economic instability. However, its remarkable recovery highlights renewed investor confidence and the area’s enduring appeal. While affordability fueled a quicker rebound in suburban areas, Rajagiriya’s premium status and strategic location have driven a sharper resurgence.
In 2022, Rajagiriya’s bare land prices plunged 48.7%, due to the devaluation of the LKR, to $ 10,290 per perch (Q2 2022), but rebounded robustly to $ 16,458 per perch by Q4 2024, which, signals positive growth for both local and foreign investors. Suburban bare land prices recovered faster ($ 8,922 per perch by Q4 2024), prioritizing affordability. Rajagiriya’s impressive 25% year-on-year land price growth in 2024 has outpaced suburban areas, which saw more modest increases of 8–13%. This rapid appreciation has drawn the attention of risk-tolerant investors who are betting on the area’s long-term potential.
A high-profile mixed-development project currently under construction by a Hong Kong-based investor is expected to have significant impacts on Rajagiriya and its real estate market. Such mixed-use projects typically act as catalysts, elevating local infrastructure, increasing land values, and attracting affluent demographics.
Historical RIUNIT data suggests that the presence of major mixed developments results in marked appreciation of land values, often exceeding the average growth rates seen elsewhere in the region.
OSL take:
Sri Lanka’s ongoing economic activities and the target of becoming a hub in the South Asian region have resulted in the increase in land value in key urban areas in the country, especially in the commercial capital, Colombo and its suburbs. It is no surprise that with Colombo in a fast-paced development programme as the commercial hub, one of its immediate suburbs, Rajagiriya, becoming the next location to be developed. The increased land values first in Colombo and now in Rajagiriya are clear indications of the ongoing developments in Sri Lanka and the overall economic expansion. With Sri Lanka targeting on achieving regional hub status supported by the country’s strong trade ties, geographical positioning in the Indian Ocean and becoming an emerging business destination in the region, business/investment opportunities in the country present lucrative ventures. Hence, investing in real estate and related sectors like house and property would present lucrative business/investment opportunities for foreign businesses/investors on the lookout for ventures in the region. The growth and profits recorded by local businesses in these sectors indicate the growing business potential in Sri Lanka’s real estate business. Foreign businesses/investors could also look at setting up bases in Sri Lanka to engage with other countries in the region.
| Article Code : | VBS/AT/20250519/Z_3 |