ESCALATING land prices and costly leases are affecting the development of new hotels in Sri Lanka, which is aiming to triple the current inventory of 15,000 rooms to 40,000-45,000 by 2016.
Land in the 500-acre (five hectares) Kuchchaveli development zone in eastern Trincomalee is going for an upfront fee of 20 million rupees (US$182,400) an acre. In Kalpitiya on the northwest coast, 1,000 acres is available at three million rupees an acre. In both Kuchchaveli and Kalpitiya, a 99-year lease is available at the annual rate of 25,000 rupees per acre.
Meanwhile, two hundred acres in Passekudah, also in Trincomalee, has already been allocated to investors on a 33-year lease, at the annual rate of 25,000 rupees per acre.
Anura Lokuhetty, president of the Tourist Hotels Association of Sri Lanka, said land prices had become a bone of contention for hotel developers. “If an investor is asked to pay 20 million rupees an acre, for 10 acres he has to pay 200 million rupees upfront. This will definitely raise the question of the project’s viability.”
Malin Hapugoda, managing director of Aitken Spence Hotels, agreed that prices had spiraled out of control. “Hotel projects need to be viable, land needs to be sold at reasonable prices,” he said.
The government has been shifting from 33-year to 99-year leases over the past year, after investors requested longer lease terms. The upfront payment option is a new development, and was introduced as a means of funding post-war infrastructural development.
