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Should I be investing in property in Sri Lanka?

You may wish to look to property as an investment either by investing in a fund, which invests in property - either commercial or domestic - or you may wish to go into the landlord business for yourself. If you do decide to purchase directly a property for investment purposes, you must realize it will be for the long-term. As the experts put it, bricks and mortar are "highly illiquid". That means if you are likely to want your money out fast, you need to be investing in something else.

Most people on the verge of retirement hand over their pension savings to a life insurance firm in return for a regular annual income, an annuity. However, with annuity rates dragged down by low interest rates, volatile investment returns and rising property values in recent years, the buy-to-let market has become more and more a part of investment planning for retirement. Mortgage interest on a buy-to-let property may be set against the tax due on the rental income.

However, you should not underestimate the cost or complexities of being a landlord, which may include agents' fees, gas inspection charges, insurance, council tax, service charges and repair and maintenance as well as the cost of 'void' periods when the property is empty. If you have bad tenants, you may even face legal bills for the cost of evicting them, making good any damage they have caused and claiming unpaid rent.

You should also remember that if you sell a second property that is not your principal residence, you may have to pay capital gains tax on the proceeds.

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