Housing Finance in Sri Lanka : Opportunities and Challenges

Sri Lanka has embarked on a gradual
transition from a system of directed credit in a highly
segmented market toward an integrated market-driven housing
finance system. This transition has included an increased
role of private universal banks in the immediate term and a
functioning secondary mortgage market in the long term. An
active system of housing finance provides real economic
benefits and positively affects savings, investment, and
household wealth. It provides an investment option for
long-term funds in the economy as an alternative to
investment in treasury bonds. In turn, each dollar invested
in the housing sector catalyzes economic activity in other
sectors, exerting an indirect positive impact on employment
levels, the retirement system, fiscal returns, and
consumption. Housing finance enables households to
accumulate assets that can provide the collateral for their
investment needs, thus stimulating small business. Housing
finance development boosts equitable economic growth and
reduces poverty by improving living conditions, empowering
the middle and lower-income population, and strengthening
communities. Housing policy focuses on improving government
land use and maximizing the use of the existing housing
stock by providing basic public services and upgrades.