Quick answer: most property in Sri Lanka is financed in one of five ways: a bank housing loan for a finished home, a construction loan paid out in stages, a land purchase loan, a loan against property you already own, or a developer's instalment plan for an apartment. Borrowing became more expensive in 2026. The Central Bank raised its policy rate to 8.75% on 26 May, and by mid-September the weekly average prime lending rate (AWPR) had reached 10.76%. Banks usually lend 70–80% of the property's value over up to 25 years. Budget about 5–6% of the price for closing costs: stamp duty on the transfer deed alone is 3% of the first LKR 100,000 and 4% of the rest.
LKPF1610This guide gives an overview of the financing routes, what they cost, the legal risks and what the market data says. For more detail on a single loan type, see the linked guides in each section.
The main ways to finance property
| Route | What it is for | Key conditions |
|---|---|---|
| Housing loan | Buying a finished house or apartment | Usually 70–80% of value, up to 25 years at most banks, repaid before age 60–65; mortgage protection and fire insurance assigned to the bank |
| Construction loan | Building on land you own, completing or extending a house | Paid in stages after the valuer inspects each stage; interest only on the amount drawn; approved building plan, bill of quantities and local authority certificates required |
| Land purchase loan | Buying a bare plot | Many banks want a construction plan alongside; clear title for 30 years and road access required; terms can be shorter than for a house |
| Loan against property | Raising money on property you already own, for business, education or debt consolidation | Typically up to 75% of forced sale value; shorter terms if the property is not your main home |
| Developer plan or condominium loan | Buying an apartment, often before completion | Tripartite agreement between bank, buyer and developer; some developers offer instalments during construction, and some partner banks lend up to 100% on selected projects |
There are also state-backed options. The National Savings Bank runs a concessionary first-home scheme for lower-income earners with a fixed rate for the first years. The Bureau of Foreign Employment's Ethera Diriya scheme subsidises housing loans for migrant workers. EPF members can pledge their balance through an EPF housing loan guarantee. Sri Lankans abroad can borrow in foreign currency under Central Bank Directions No. 11 of 2021, repaying from inward remittances or a personal foreign currency account. Our guides cover housing loans and land purchase loans in depth, and who qualifies.
Interest rates in 2026
After two years of falling rates, the Central Bank raised its overnight policy rate (OPR) by one percentage point to 8.75% on 26 May 2026, its first increase since 2023, and kept it there at the July and September reviews. Lending rates followed. The monthly AWPR was 10.50% in July 2026, 1.63 points higher than at the start of the year, and the weekly figure reached 10.76% in the week to 18 September.
Housing loan rates at banks generally range from about 10% to 14% a year in 2026, depending on the bank, your income and whether the rate is fixed or floating. Published rate tables for individual banks contradict each other, so we do not list them here; ask each bank for a written offer. Most housing loans in Sri Lanka are floating and move with AWPR, so a one-point rise in AWPR feeds into your instalment at the next reset. A fixed rate costs more at the start but protects you in a year like 2026. Compare current offers in our mortgage rate comparison and work out your instalment with the home loan calculator.
A residential housing loan rate cap of 7% for the first five years, with AWPR plus 1% thereafter, remains active under Monetary Law Act Order No. 3 of 2020. National Savings Bank's first-home scheme still reflects this structure: a fixed 7% for five years on loans up to LKR 5 million, as of October 2026. The same scheme allows land purchase if at least one-third of the loan goes to the plot, a split the body does not mention. A new 18% VAT applies to newly built apartments from VAT-registered developers, adding to the price on top of the stamp duty and legal costs already covered. For buyers weighing total outlay, the home loan calculator can show the impact of a higher purchase price on the monthly instalment before you commit.
Commercial Bank charges an extra 0.75% on the interest rate when the loan exceeds 75% of the forced sale value, a pricing rule not stated in the body. Tenure also varies more than the standard 20–25 years: Commercial Bank caps salaried loans at 20 years, and DFCC extends up to 30 years on selected properties, as of October 2026. For migrant workers, the Bureau of Foreign Employment's Ethera Diriya scheme subsidises housing loans, and EPF members can pledge their balance through an EPF housing loan guarantee. Eligibility conditions for both are set out in the housing loan eligibility guide. Ask each bank for its written offer, since published rate tables still conflict, and check whether your chosen property triggers a higher rate.
What buying with a loan costs
| Cost | Rate or typical amount | LKR 20 m property with LKR 10 m loan |
|---|---|---|
| Stamp duty on the transfer deed (paid by the buyer) | 3% of the first LKR 100,000 and 4% of the balance | LKR 799,000 |
| Stamp duty on the mortgage bond | 0.1% of the loan (LKR 1 per LKR 1,000) | LKR 10,000 |
| Lawyer and notary | Often around 1% of the price for the deed; the bank's lawyer charges separately for the mortgage bond | About LKR 200,000–300,000 |
| Valuation | Independent valuer report | About LKR 15,000–25,000 |
| Title search and registry extracts | 30 years of Land Registry extracts | About LKR 7,500–15,000 |
| Bank processing fee | Often 0.5–1% of the loan or a fixed fee | About LKR 50,000–100,000 |
In this example, closing costs come to roughly LKR 1.1–1.25 million on top of the down payment. Stamp duty is set by the provincial councils; the 3% and 4% rates are those used in the Western Province. A transfer between spouses is exempt. Apartments bought new from a VAT-registered developer carry 18% VAT in the price. When you sell, capital gains tax may apply to investment property, but a principal residence you have owned for three years and lived in for two of them is exempt; check the current rate with the Inland Revenue Department before you sell. A national property tax is planned for the first half of 2027 under the IMF programme.
Legal risks you should understand
- Parate execution: under the Recovery of Loans by Banks (Special Provisions) Act No. 4 of 1990, a bank's board can auction a mortgaged property without going to court. Act No. 26 of 2024 suspended this power from May 2024, and relief for SMEs was extended in stages until the end of 2025. In October 2026 the Deputy Minister of Finance confirmed in Parliament that the moratorium was lifted in 2025. Banks can once again auction property quickly if a loan goes bad. The Supreme Court ruled in Sunpac Engineers v DFCC Bank that this also covers third parties who mortgage their property for someone else's loan, such as a director securing a company loan.
- Default: missed instalments attract penalty interest, are reported to the Credit Information Bureau (CRIB), and after about 90 days the loan is classed as non-performing. If rescheduling fails, the bank sells the property by parate auction or through a court action under the Mortgage Act. Talk to the bank before you miss a payment, not after.
- Title: under the old deed registration system, registration does not guarantee ownership, so a lawyer must trace an unbroken chain of title over 30 years. Property registered under Bim Saviya (Registration of Title Act No. 21 of 1998) has a state-guaranteed certificate of title. Banks also want recent local authority certificates: street line, building line, non-vesting and ownership.
- Condominiums: an apartment block becomes a legal condominium only after its condominium plan and deed of declaration are registered. Owners then form a management corporation that collects maintenance charges. Foreign buyers must fund the purchase entirely with inward foreign currency remittances.
What the market data shows
Land prices are still rising, but more slowly. The Central Bank's land valuation indicator for Colombo District stood at 271.6 in the first half of 2026 (2017 = 100), up 5.9% in a year. Residential land rose 6.7%, ahead of commercial and industrial land.
Apartments are in demand. The Central Bank's survey for the fourth quarter of 2025 found new condominium prices in Colombo up 13.3% in a year and sales volume up 108%, with 40% of sales in the LKR 25–50 million bracket. 82% of buyers paid with their own money and only 18% used a bank loan. Worker remittances of USD 8.1 billion in 2025 and USD 6.1 billion in the first eight months of 2026 support cash purchases, especially by families with members abroad. Rental yields on Colombo apartments are only about 3–4% a year, below current loan rates. Buying an apartment to let out with borrowed money rarely pays for itself from rent alone.
Before you commit, compare several bank offers, ask about fixed rates, and keep a reserve of at least a few months' instalments. Read the facility letter's clauses on rate resets, penalties and early repayment. Our guide to refinancing a housing loan explains your options if rates fall again.
Before signing, obtain a fresh 30-year Land Registry extract and an independent valuation report, and request the bank's Key Facts Document so the effective rate after any LTV penalty is stated in writing. If you believe the capped 7% structure under Monetary Law Act Order No. 3 of 2020 applies to your salaried housing loan, ask for the written confirmation. Compare at least two written offers, because published rate boards still conflict. Buyers of new apartments should confirm the developer's VAT registration before calculating the amount borrowed. When the loan is granted, the stamp duty on the mortgage bond is 0.1% of the loan, paid at execution. For disputes over stamp duty, contact the Provincial Revenue Department; for complaints about a bank, use the Financial Consumer Relations Department of the Central Bank. If the property is investment rather than a principal residence, check the current 10% capital gains tax rate with the Inland Revenue Department before you sell.