Conference Proceedings : “JANASEVANA” National ... - UN HABITAT

LTTE. He mentioned several key issues for consideration by the forum. These include the housing quality levels in the
country, affordability from different perspectives and housing as an investment opportunity.
Housing by tenure of accommodation
Sri Lanka has high levels of home ownership especially when compared to
developed economies. 89% of the housing stock in the country is owned
while only 3% is rented or leased. The balance consists of 3% of houses
which are free of rent and 5% that are owned by the government or by
employers. In developed countries such as the United Kingdom, the
percentage of owned houses is relatively low at around 65%. However,
these countries do have good quality housing. The reason for such a high
percentage of owned houses in Sri Lanka is due to issues with rented
houses such as difficulties in evicting tenants, which results in many home
owners being reluctant to rent their houses. If Sri Lanka is to create a
vibrant rental market, these issues will need to be resolved.
Types of housing in Sri Lanka:
• Single units : 91%
• Annexures: 3%
• Condominiums/flats: 1%
• Shanties consist of 1%
• Line rooms: 4%
The size of a house defines the quality of the house as it requires adherence to certain minimum requirements, such
as a kitchen, living space and bedrooms. In Sri Lanka, 36% of the houses consist of a small area (0‐527 square feet).
According to housing standards, middle income homes should be at least 1000 square feet. 55% of housing units in Sri
Lanka are made of brick. With regard to flooring used by houses, Mr. Barnabas stated that 78% of the houses use
cement flooring while 15% use clay or mud. The basic cost of constructing a house calculated at Rs. 1,500 per square
foot, the cost per 500 sq. ft. housing unit is around Rs.750, 000, without taking the cost of land into consideration. This
would mean a minimum of 525 Bn to meet current shortages. As it is difficult for the government to meet all housing
requirements, it is essential that partnerships are formed with the private sector and NGOs.
The earning capability of the country’s income earners is a vital component for consideration in housing finance. The
mean income per income receiver in Sri Lanka is estimated at Rs. 10,754, while the average household income is
Rs.17, 107. When considering housing loans, banking norms normally provide loans that are a maximum of 45% of the
salary. Therefore, an average housing loan would be approx. Rs.7, 700. Although banks are eager to lend to people,
there are macro challenges including a volatility of interest rates and an anomaly in yields – e.g. Treasury bills are
higher while rent yields are low in Sri Lanka. Hence, there are difficulties in financing a house and servicing one’s loan.
Provision of housing loans is a challenge for Sri Lankan banks. This difficulty arises as 70% of the country’s population
is around/below the mean income levels. Housing Finance is an attractive product for the banks; however it has
challenges such as volatility in interest rates and matching tenor. A large percentage of the population requiring
housing belong to the non‐bankable sector. Hence providing security to obtain a loan remains a challenge while the
legal cost is an added burden. The need for technical input to optimize quality and insurance cover may be vital.
It was recommended that there is need for greater investment in housing. Affordability is clearly a challenge for the
majority of the people. Hence, a stable interest rate structure is needed. Savings is a key driver and innovative
approaches are needed to reach the non‐bankable section of the population. Wider provision of housing finance
microfinance and more innovative approaches are needed to bank the un‐bankable segments of the population.
Investments in Housing: Current Trends, Opportunities and Challenges
Dr. Darin Gunesekera
Investment in Housing
In market economies, there is a stable relationship between housing and investment. Of all investment, approximately
half has always been in fixed assets, of which the predominant part has been in housing. The dominance of housing
has been a feature of investment. However, the money investment in residences is not stable. On the contrary, the
private sector economy of housing is always cyclical. In recent decades the housing/construction cycle has become
more pronounced. During the recent global financial crisis the loss of value was estimated at US$30 Trillion.
Conference Proceedings – National Housing Symposium 19