Sri Lanka has the proud heritage of being a developed nation in ancient times. It is believed that even before recorded history of 2,500 years; there existed developed cities with proper infrastructure. As recorded in historical chronicles, great cities such as Anuradhapura and Pollonnaruwa existed with many aspects of urban development and sustained its existence over a period of 14 centuries. The buildings were advanced in terms of maximizing airflow, sustainability and comfort and still continue to inspire modern architect today.
However, urban development in the post-independence era has been less impressive, typically stretching out along the main truck routes into the capital in the form of low-rise vertical developments that are an eyesore at best. Moreover, lack of town planning and vision is currently leading to externalities such as rising levels of traffic congestion, a poor public transport system, a scarcity of public open spaces and air pollution. According to a report released by an international research agency in 2011, Colombo was listed amongst one of the worst cities to live in.
Whilst there are government drafted zoning plans that continue to guide land use in Colombo, the seemingly spontaneous emergence of tall buildings in all parts of the capital is essentially driven by market forces.
The immediate concern of many commentators is that despite the visible improvements that has taken place in the city, the lack of an overall strategy that will address multifarious concerns of the capital and its immediate surroundings in the Western Province, poses serious threats to the future growth of this part of the island which represents the economic growth engine of the island economy. Such a scenario threatens to reverse much of the recent progress made.
The Western Megapolis is a project that embraces the plans, implementation and strategies that are diverted to develop the Western Region of the country in order to achieve Sri Lanka’s national goal of becoming a high income developed country. The plan envelops the entire spectrum of activities that are involved in achieving this great national objective.It is envisioned that the following three methods would be engaged in positioning the nation towards this goal:
1) Enable the national economy to capitalize on the gains of economies of agglomeration that would result in urbanization;
2) Eliminating negative aspects that results from development of urban infrastructure especially unplanned, haphazard urbanization;
3) Reducing per unit capital cost of infrastructure provisioning.
The Western region constitutes of three administrative districts, namely Gampaha, Colombo and Kalutara. Colombo is the economic, commercial, financial, and intellectual hub of the country. The population of this region is around 5.8 million, with about 2 million living in Colombo and its suburbs. The total population in the proposed Western Megapolis is envisaged to reach 8.7 million by 2030.
The Western Region covers only six per cent of the total land mass of Sri Lanka but accommodates about 29% of the total population of Sri Lanka. It also produces more than 40% of the total GDP of the country.
Over the past 10 years, the population growth in the western region was marginal, but the level of urbanization was very high, especially in the Gampaha District. This is mainly due to land availability and its proximity to employment and economic centres, such as the city of Colombo, port, airport, industrial areas, BoI zones, etc. Presently, the population in Gampaha District is almost the same as in Colombo.
It is predicted that the population of Gampaha would surpass Colombo in the near future.
As RIU has been monitoring land prices in Colombo for over a decade, we can note that land prices in Central Colombo have hiked at extraordinary rates since the end of the war in 2009. This landmark achievement was the most significant factor to impact the property market.
In the short term, we do not expect any major impact of the Megapolis plan on property prices. We can expect to witness continued interest in apartments, houses and lands from local individuals, expats and to a lesser but growing extent, foreigners. If we consider the luxury apartment segment, current supply is set to move from 3000 units to 6,000 by 2019 with projects such as Altair, Shangri-La and Colombo City being completed.
In the long term, land prices in the suburbs and beyond will receive a boost from receiving the benefits of better planning in a similar way to the impact of recent city ‘beautification’ on Colombo Central land prices. However, there will be significant differences between areas that benefit from new road and rail infrastructure initiatives from those areas that do not. Therefore, the impact on different geographical locations on the Western Province will need to be assessed on a case-by-case basis. There will certainly be winners, but there may also be some losers.
With reference to the much talked about Colombo Port City project, the green lights that were given to what will be the single biggest private sector development project in the history of the island, turned to amber with the change in political power in 2015. However, this ambitious project is said to now be incorporated under the overall Megapolis plan and will go ahead following some additional compliance and environmental impact studies in order to confirm that there will be no negative impact on the coastline. It is also expected that foreign ownership will be limited to long-term lease agreements as opposed to freehold ownership which was previously agreed.
Assuming that the project will go ahead as planned, its impact on the Colombo real estate market will be a long-term consideration. Whilst it’s true that the additional 575 acres of waterfront land will add to the supply of real estate stock in the city, we can expect that much of the demand for Port City land will arise from new areas of economic activity along with port-related businesses and leisure sector developments. The SLPA Chairman had remarked recently that the area will be” developed as a Port City with roads, water, electricity, communication facilities to set up shopping areas, water sports area, mini-golf course, hotels, apartments, recreation areas, marinas and with a lot more additions that will develop the area as a modern city.
Therefore, we would expect the Port City to elevate the profile of Colombo and increase the demand for its real estate from both local as well as foreign investors.