The 4th Floor Rule — Condominium Act

Under the Land (Restrictions on Alienation) Act No. 38 of 2014, foreigners may only purchase condominium units from the 4th floor and above. Units on the ground, 1st, 2nd, and 3rd floors are restricted, regardless of the building's total height. Always confirm the floor number with your lawyer before any payment — some listings describe floors ambiguously (e.g. 'Level 5' may not equate to the 4th floor above ground).

Inward Investment Account (IIA) — your repatriation lifeline

The IIA is a special bank account that records every inward foreign currency remittance. Purchase funds must flow through it, and future sale proceeds must be repatriated via the same account. Without a properly documented IIA, you may face significant difficulty moving money out of Sri Lanka after you sell — even years later. This is non-negotiable.

The 49% Company Structure

A foreign national can set up a Sri Lankan private limited company to buy land, provided total foreign shareholding does not exceed 49% — a Sri Lankan partner must hold at least 51%. The company then owns the freehold land in its own name. This is the most common structure for commercial property or villa development. Listed public companies may have higher foreign shareholding thresholds; consult a lawyer if this route interests you.

Capital Gains Tax (CGT) on Sale

A flat 10% capital gains tax applies to profits made when selling property, effective April 2018. The gain equals sale price minus original cost of acquisition. Exemptions apply if the gain is under LKR 50,000, or if the property served as your principal residence for at least 2 of the last 3 years before sale. CGT is payable to the Inland Revenue Department and must be settled before the buyer can register the new deed.

99-Year Lease — what it means in practice

A 99-year leasehold gives you full rights to occupy, build on, and use the land for the entire term. You can sub-lease or assign the lease (subject to the original agreement). At the end of the term, ownership reverts to the landowner unless renewed. Stamp duty on the lease is 1% of the total lease consideration. Ensure the agreement clearly states your rights to build, renovate, and sublease.

Residency Visa via Property Investment

Sri Lanka offers an Investor Visa tied to property investment. A condominium purchase of USD 200,000 or more qualifies for a 10-year renewable residency visa; USD 100,000 or more qualifies for a 5-year renewable visa. Funds must be deposited via an IIA before the visa application. This is an attractive pathway for retirees, digital nomads, and long-term investors who do not need full citizenship.

Financing — no local mortgages for foreigners

Foreign nationals cannot obtain mortgage financing from Sri Lankan banks — you must bring your own funds. Dual citizens and non-resident Sri Lankans (NRSLs) are the exception and are eligible for local bank financing. Some developers offer their own instalment plans for off-plan purchases, but full payment must still be completed before the transfer deed is executed.

Buying Property as a Foreigner

Sri Lanka welcomes foreign property investment — but the rules differ significantly from local purchases. This guide covers exactly what you can own, the three main ownership structures, all costs involved, and how to navigate the process with confidence.

Your Three Ownership Routes


Freehold Condominium	Full ownership of a unit on the 4th floor or above	100% foreign-owned permitted	Apartments, holiday homes, investor visa
99-Year Land Lease	Right to use and build on land for the lease term	100% foreign-owned permitted	Villas, boutique hotels, commercial projects
Sri Lankan Pvt. Company	Company owns freehold land in its own name	Max 49% foreign shareholding	Large investments, mixed-use developments

Freehold Condominium

What You GetFull ownership of a unit on the 4th floor or above

Foreign Limit100% foreign-owned permitted

Best ForApartments, holiday homes, investor visa

99-Year Land Lease

What You GetRight to use and build on land for the lease term

Foreign Limit100% foreign-owned permitted

Best ForVillas, boutique hotels, commercial projects

Sri Lankan Pvt. Company

What You GetCompany owns freehold land in its own name

Foreign LimitMax 49% foreign shareholding

Best ForLarge investments, mixed-use developments

The Buying Process

Stamp Duty Calculator

Property price (LKR)

Other Costs to Budget For

Good to know

VAT — 18% on new condominium purchases

Applies to first-sale condominium units bought directly from a developer. Secondary market sales (from another individual owner) are not subject to VAT. On a USD 300,000 new unit, that's an additional USD 54,000 — always confirm whether a listed price is VAT-inclusive.

Good to know

Legal & notary fees — 2–3% of purchase price

Covers title search, deed preparation, attestation, and registration. Agree the fee in writing before engagement. Some lawyers offer a flat rate for straightforward condominium transactions.

Watch out

Capital Gains Tax — 10% on profit at resale

A flat 10% CGT applies to gains when you eventually sell. Factor this into your investment return calculations — it meaningfully affects ROI on short-to-medium term holds. See Key Concepts below for exemptions.

Key Concepts for Foreign Buyers

Documents You'll Need

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Common Pitfalls to Avoid

Watch out

Paying outside the IIA

Transferring funds directly to a seller or developer account bypasses the only legal route for future repatriation. Without IIA documentation, your sale proceeds may be stuck in Sri Lanka indefinitely.

Watch out

Trusting a developer's floor numbering

Floor restrictions are strictly enforced and a restricted-unit purchase is legally void. Have your lawyer independently confirm the unit is at or above the 4th floor before any payment — marketing terms like 'Level 3' can be misleading.

Watch out

Signing standard developer agreements unreviewed

Developers often present pre-signed standard agreements under time pressure. Key protections around floor compliance, payment staging, and delivery timelines are buried in the fine print — always insist on independent legal review.

Good to know

Forgetting VAT when comparing new vs resale

An 18% VAT on new condominiums can shift the value equation versus secondary-market units. Always compare on a VAT-inclusive basis so you're measuring true out-of-pocket cost.

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