Buying Property in Sri Lanka

A short guide to buying land and homes on Sri Lanka's south coast, from the people who grew up, live and work here.

Unless you are a Sri Lankan citizen, you can't buy land here in your own name. It's usually the first thing we explain. There are still proper, legal ways to buy, and we’ll walk you through them the way we would if you were sitting in our office in Ahangama.

We're a small team based in Ahangama. We find land and homes along the coast, work with our lawyers on the legal side, and set up the company or lease your purchase needs.

What you can (and can’t) own in Sri Lanka

Under Sri Lankan law, a foreigner can't own land freehold in their own name. That leaves two routes, and in practice which one fits depends mostly on your own situation.

A/ The first is buying through a Sri Lankan company. The company owns the land outright, and you own shares in the company. The law limits how much of it a foreigner can own, so the majority of the shares (minimum 51%) are held by Sri Lankan shareholders. We can help you set up the company structure and our secretarial team looks after its yearly company filings from then on.

B/ The second option is a registered long lease with the land owner. A lease can be held in your own name or through a (foreign or local owned) company, depending on whether the property is for personal use or for business. You don't own the land itself, but you have the use of it for up to 99 years, and the lease is recorded at the Land Registry.

A long lease is registered, it gives you the land to yourself, and you can sell (part of) it, leave it to your children or renewed/extend if both you and the owner agree.

If you're a Sri Lankan dual citizen, you can buy land in your own name.

We go through these options with you and our lawyers early on, so you know which structure applies before you start looking.

Finding the right property

From the day you agree a price to the day the deed is registered, a straightforward purchase can take between one to three months, depending on the structure you choose. Buying with ahangama.co typically starts by filling out our client form, which allows us to go through your requirements to see which properties we have on file that match. We put together a shortlist, then meet with you to walk through your purchase or lease options and the steps involved, and show you around.

A few practical points are worth knowing at this stage:

  • Land in Sri Lanka is measured in perches: one perch is about 25 square metres, and there are 160 perches in an acre. Prices are usually quoted per perch.

  • For beachfront land, the Coast Conservation Department decides how close to the shoreline you can build, so the buildable area of a plot may be smaller than its total size.

  • Building plans need approval from the local authority. If there's already a house or structure on the land, we can check that/if it was built with the right approvals.

When you find the right place, we negotiate with the seller for you.

Due Diligence

Before you sign anything or pay a deposit, you appoint a lawyer and a licensed surveyor to go through the property. We’re happy to work with your own lawyer, and if you don't have one yet, we can introduce you to ours.

The legal team searches the Land Registry and follow the deeds back at least 30 years, to make sure the person selling really owns the land and nothing is missing from its history. They also check there's no mortgage on it, no legal claim against it and no family dispute over who owns which part, in case land is shared between relatives over generations.

A licensed surveyor goes through the boundaries and compares them with the survey plan.

Setting up your company and bank accounts

Before purchasing a property or while the due diligence is underway, we set up your company structure. We can incorporate the company for you, and our secretarial team looks after its yearly statutory filings from then on. There's a cost of setting it up, plus a yearly fee to keep its paperwork in order. If you're taking a lease in your own name, this part isn't needed, though if you plan to use your property for business purposes, opening a management/operating company (which can be up to 100% foreign owned) is the legal route.

Your money needs to come in through an Inward Investment Account at a licensed Sri Lankan bank, and we can guide you through opening one before you transfer anything. The account keeps a record of what you brought into the country, and that record is what lets you take the money out again if you ever sell.

Signing and completion

Most buyers agree with the sellers to sign a pre-sale agreement in front of a notary, with the buyer paying the deposit. We especially recommend this step when a company needs to be incorporated first.

On completion day, the Deed of Transfer is signed in front of a notary and stamp duty is paid. At the moment that's 3% on the first LKR 100,000 and 4% on the rest, and you'll also pay your lawyer at this stage. The deed is then registered in your company's name. If you're taking a lease, the lease is registered instead of a transfer deed.

From the day you agree a price to the day the deed is registered, a straightforward purchase can take between one and three months, depending on the structure you choose. We give you the full numbers before you commit.

After the purchase

If you rent the house out, the income is taxable in Sri Lanka and has to be declared. We recommend speaking to a tax adviser as well.

If you own through a company, our secretarial team keeps its yearly statutory filings up to date. If you ever sell, the proceeds go back out through the same Inward Investment Account your purchase money came in through.

A quick answer to your questions

  • Not in your own name. A foreigner can't own land freehold personally, but you can own it through a Sri Lankan company (with a maximum 49% foreign shareholding), or take a registered lease of up to 99 years. Apartments in a registered condominium are the exception, and those you can buy in your own name.

  • The company holds the land freehold and you hold shares in it, with foreign shareholding kept below the legal threshold (49%).

    Alongside it, you can set up a second company to operate the property, and that one can be 100% foreign-owned.

    We can incorporate both companies for you alongside your purchase and look after their yearly filings afterwards.

  • It is, as long as it's registered with the Land Registry. The land is yours to use for the full term. You can also sell (part of) the lease on, leave it to your children, or extend the lease if agreed with the owner.

  • Your lawyer searches the Land Registry and traces the deeds back at least 30 years, and a licensed surveyor checks the boundaries against the survey plan. Nothing is signed or paid until those checks are done.

  • Through an Inward Investment Account at a licensed Sri Lankan bank. Open it before you transfer anything, as it's the record that lets you take sale proceeds back out of the country.

  • From the day you agree a price to the day the deed is registered, a straightforward purchase can take between one to three months, depending on the structure you choose. Buying with ahangama.co typically follows the following steps:

    1. You fill out our client form, and we go through your requirements to see which properties we have on file that match. We put together a shortlist, then meet with you to walk through your purchase or lease options and the steps involved, and show you around.

    2. When you find the right place, we negotiate with the seller for you.

    3. The lawyer does the title search and the surveyor checks the land. This usually takes up to two weeks, though complex cases can take longer.

    4. While that's happening, we set up your company structure and, if needed, help you open an Inward Investment Account. That's the bank account your purchase money comes in through.

    5. You and the seller sign a pre-sale agreement in front of a notary, and you pay the deposit. We especially recommend this step when a company needs to be incorporated first.

    6. On completion day, the Deed of Transfer is signed in front of a notary and stamp duty is paid. The deed is then registered in your company's name.

  • On top of the purchase price, the stamp duty, currently 3% on the first LKR 100,000 and 4% on the rest, plus your lawyer's fees. If you need a company, there's also its set-up cost and a yearly fee. We give you the full numbers before you commit.

  • Not for every step. You will have to come in person at least once as required by Sri Lankan banks, but most steps from then onwards can be completed remotely. We also always recommend to view land options in person.

  • A straightforward purchase can take one to three months from agreed price to registered deed, depending on the structure. The legal checks and survey usually take up to two weeks of that.

  • Yes. Rental income is taxable in Sri Lanka, so it would have to be declared.