The real estate industry is a very old one, and one which will never go away. People need housing to live in, commercial spaces to carry out their business, and even bare land to develop and grow like agriculture land for sale, hence it is one of those investments that is hardly affected by external factors. However, according to real estate companies in Sri Lanka, this is not saying that the industry and its stakeholders don’t have problems and challenges to face.

There are many problems that the industry itself is facing and so are the two main stakeholders; the real estate companies and the buyers. So, let’s take a close look at what these challenges are, in order to better understand this very lucrative investment opportunity and where it stands to this day.

What are the challenges that the real estate industry is facing?

Although this industry does not generally get affected in a huge way by external forces like inflation etc, it still has an impact on it. Here are some of the challenges that the real estate industry is facing now.

• Inflation and interest rates: Many economies around the world are facing very high rates of inflation, and although inflation does not directly impact property pricing (since these prices also go up and is a positive trend for investors), there are other aspects of inflation that affect it in a negative way. For example, job security is at an all time low with many companies (both during and post Pandemic) have made many of their employees redundant. This, together with rising prices of goods and services, means that people have no money to spend. This can result in nothing other than a lower demand for both commercial and property, as people will be using what money they have for day to day living than investing in housing or land for sale.

• High price of materials and labour: Inflation also affects new constructions in a bad way. Price increases in materials needed for construction will make people think twice before they go for a solution such as this, and to top it all off, there is the increased cost of about as well, due to shortfalls of these type of skilled labour in the market.

• Politics unrest: On top of economic issues faced by countries around the world, many are also going through political unrest, which has further made a huge impact on the real estate industry. Supply chain issues and commodity pricing are adversely affected when there is political unrest. When supply chain issues hit the industry, this means that there won’t be sufficient material available in the market for construction work, irrespective of what price they are selling at, and whatever is there will be hugely overpriced due to demand and supply issues.

• Greater focus on environmental and social responsibility: With the ESG framework coming into play in recent times, businesses are required to publicly divulge how their environmental impact and stewardship stands, which has caused quite an uproar among the corporate world. While this is a good thing, to bring a more enhanced sense of responsibility for the way they are carrying out their business processes, it has also elevated costs for companies who have to make changes.

• Sustainable energy: There is no doubt that commercial enterprises are some of the biggest consumers of energy, and with environmental issues coming int play in recent times, they have had to make huge changes to reduce energy consumption, which had meant additional expenses in changing infrastructure and processes. These added costs have left little or no funds left for them to diversity their investments into other areas.

• Housing imbalance: The real estate industry, as with other industries, need to have a balance of demand and supply, in order to keep pricing at a stable level. However, in recent times with external factors playing a hand, there have been huge imbalances; during certain times there has been a huge demand for real estate while the supply was limited, and vice versa. This imbalance negatively impacts each and every stakeholder and the industry as a whole.

• Regulatory unrest and uncertainty: As with political unrest, regulatory unrest too has an impact on the real estate market. Government may come up with new regulations to combat certain issues within the economy which can have a profound effect on the buying decisions of consumers in the real estate market.

What are the challenges that the real estate companies are facing?

While the industry itself is facing man challenges, one of the main stakeholders, the real estate companies are also having their own set of problems which they need to deal with. Here are some of the challenges they are facing in recent time.

• Amplifying property listing: With people within their own regions facing reduces purchasing power and opting against investing in real estate, property companies have found a need to increase their reach beyond borders, which means added costs in terms of marketing and promotions. The question still lies whether the added expenses will actually be able to bring in a suitable return.

• Managing listing and leads: With companies focussing on regions beyond their present purview, it brings added problems with managing listings and leads, and ensuring that enquiries are handled efficiently.

• Increased use of technology: With the Covid-19 pandemic, came greater innovation and the increased se of technology in almost everything we do, and this also affected the real estate market. More and more people are unwilling to go out now, even during these post pandemic times, and real estate companies have been compelled to over into the new era of technology-based activities, like virtual home tours, site visits using drones etc. This has added a new element of cost which they need to cover up with profits.

• Streamlining communication: Communication has probably taken on the biggest hit since the pandemic; what used to be faced to face met ups and visits, have now turned into virtual meetings, which have presented problems and expenses of their own.

What are the challenges that the real estate buyers are facing?

Like other stakeholders, real estate buyers too are facing challenges and problems these days. Here are some of the top challenges face by home and land buyers in Sri Lanka and elsewhere around the world.

• Online listing or real estate agents: With almost everything being done online these days, the real estate industry too has moved into this arena, and property buyers are faced with the question of whether they should search for a property themselves or go with a reputed real estate agent.

• Seller dishonesty: With uncertainties in the economy, there is a huge chance for the dishonest seller to carry out their business without anyone even realising it, until things get too far. Shoddy maintenance work to cover up serious issues, poor workmanship and construction are all things that a home buyer can be faced with if they are not careful.

• Financial issues: With increasing interest rates and uncertainty regarding jobs and finances, people are unsure of whether to take debts or mortgages in order to buy property, as they may not be able to pay the instalments. They may also be unsure if all their savings should be spent on real estate when there are bigger issues at hand.

• Locations: With less and less property available in cities, people are being forced to move into more rural areas when they want to buy property.