Examining the Impact of Sri Lanka’s Economic Crisis (2022 to 2024) on Condominium Developers: Effects and Responses

Abstract

Sri Lanka has recently faced one of the most severe economic crises, which is significantly impacting various firms and industries, including the real estate sector. Among the most affected is the condominium development sector, which is significantly interrelated with the countries’ economy. Despite this significant relation, there has been limited research on how economic crises influence the real estate sector in developing South Asian countries including Sri Lanka. Especially, there is a lack of context-specific studies on how such crises impact housing markets and what are the responses towards crises. This study aims to address this gap by focusing on two main objectives: (1) to examine the effects of the economic crisis on condominium developers in Sri Lanka, and (2) to explore the strategies these developers adopt in response to the crisis. The findings are expected to contribute valuable insights into the resilience and adaptability of the real estate sector during periods of economic instability. Five (5) condominium developers with varying capacities and portfolios were selected to understand how diverse the impacts and responses could be. In-depth interviews with key informants and document surveys were used as the methods of data collection. Following a qualitative approach, content analysis was used to analyze the data collected. As the findings revealed, the impacts of the economic crisis can be mainly identified as demand-side shocks and supply-side shocks. Regarding developers’ responses, the high-income group-focused developers focus on “strategic responses” such as tapping into new market segments and project diversification. Meanwhile, middle-income-focused developers use investment responses to withstand the crisis. The long-term impacts of organizational-level responses on urban development and the housing market particularly in terms of affordable housing supply are yet to be explored in future.