Short answer

• Best options for expat investors in Sri Lanka: (1) condominiums (legal direct ownership when properly structured), (2) long‑term leasehold (up to 99 years) for villas/land/developments, (3) serviced-apartment / short‑let investments in tourist hubs, and (4) commercial/office or mixed‑use in Colombo (often via a local company structure). (tpp.lk)

Why those (quick reasons)

• Condominium units: one of the simplest legal ways for foreigners to hold real estate (subject to apartment law and inward remittance rules). Good for city buyers and premium coastal developments. (happyproperties.lk)
• 99‑year leases: give near‑long‑term control of land/villas or resort sites where freehold is not available to foreigners. Widely used for tourism projects. (tpp.lk)
• Serviced/short‑let properties in tourist areas: high seasonal income potential (Mirissa, Galle, Unawatuna, Hikkaduwa, Bentota, Trincomalee) if managed correctly. (lankaland.com)
• Colombo commercial/residential: largest market, best liquidity for resale and long‑term rentals to expats/locals, suitable for higher‑end condos and offices (often needs local company arrangements for larger land deals). (colomborealtors.lk)

Top locations and why

• Colombo (Colombo 2/3/7/8 etc, and emerging suburbs like Rajagiriya/Colombo 10): biggest demand for expatriate rentals, corporate leases, better resale/liquidity and professional property management. (colomborealtors.lk)
• Galle / Unawatuna / Mirissa (Southern coast): strong holiday‑rental market, luxury villa/resort potential; seasonal but premium nightly rates. (lankaland.com)
• Negombo / Wattala (near Bandaranaike Intl. Airport): good for short stays and repatriate/airline staff rentals, convenient for returning tourists. (lankaland.com)
• Kandy and Hill Country: steady domestic demand, boutique stays and cultural tourism; lower yield than coastal holiday spots but less seasonal. (lankaland.com)
• Trincomalee / East Coast and Hambantota: frontier opportunities (ports, tourism), higher risk/reward — suitable for investors comfortable with longer horizons. (tpp.lk)

Typical acquisition routes for foreigners (legal basics)

• Buy an apartment/condominium (units above the 4th floor commonly referenced in practice) — payment must be by inward foreign remittance and proper registration under apartment/condominium laws. (tpp.lk)
• Lease land (up to 99 years) — common for villas, resorts and landed property. Leases are registered and commonly used by foreigners. (lankaland.com)
• Invest via a Sri Lankan company (local shareholding rules apply — historically structures require local ownership >50% for freehold acquisition, so use careful legal structuring). (desaram.com)

Tax, money flow and repatriation — essentials

• Funds for condo purchases must be remitted through appropriate banking channels (SIA/IIA) to ensure you can repatriate proceeds; consult a bank/lawyer for the exact procedure. (tpp.lk)
• Taxes to consider: stamp duty, transfer taxes and possible VAT on new condominium purchases; capital gains/other taxes can apply on sale. Exact rates depend on transaction and timing — get local tax advice. (tpp.lk)

Expected returns / yields (broad guidance)

• Long‑let residential in Colombo (quality condos): gross yields often in single digits (4–8% range typical in many emerging Asian cities) — varies by unit, location and market conditions.
• Holiday/short‑let coastal villas and serviced apartments: yields can be higher seasonally but more volatile (can exceed long‑let yields in peak seasons).
• Commercial/office in Colombo: depends heavily on tenant mix; can offer stable longer‑term contracts but also depend on economic cycles.
  Note: yields change with market cycles; verify current market figures before committing. (Local agents and recent market reports will give up‑to‑date yield data.)

Practical checklist before you buy

• Confirm legal title and permitted foreign ownership route (condo vs lease vs company). Hire a Sri Lankan property lawyer. (desaram.com)
• Ensure purchase funds are transferred through the correct remittance account (SIA/IIA) so repatriation is possible. (myserendib.com)
• Check developer reputation, building approvals (CMA/Apartment Ownership registration), encumbrances and land zoning. (colomborealtors.lk)
• Get independent valuation, inspect rental demand and seasonality, and estimate operating costs (management, maintenance, taxes).
• Plan exit strategies (resale market, lease resale, or selling company shares) and document repatriation/revenue expectations.

Risks to watch

• Legal/regulatory changes (land laws and foreign investment rules can be updated) — always get fresh legal advice close to transaction time. (tpp.lk)
• Currency, political and tourism‑sector volatility (Sri Lanka is sensitive to macro shocks; yields and demand can swing).
• Developer project delays or quality shortfalls — use escrow/contract protections.

Next practical steps (quick)

• Talk to a reputable local real‑estate agent for recent comparable sales and rental data in your target area.
• Engage a Sri Lankan real‑estate lawyer to confirm the correct structure (condo purchase, lease, or local company) and to review contracts. (desaram.com)
• Request latest market reports for Colombo and your chosen coastal area (to confirm current yields and demand).

If you want, I can:

• Summarize pros/cons for a specific city (e.g., Colombo vs Galle) with current market data, or
• Draft a checklist of documents and questions to give to lawyers/developers when you start due diligence.

(Important legal note: I’ve cited general guidance from recent local sources — laws and policies affecting foreign ownership have changed in the past and could change again. Before any purchase, get up‑to‑date legal and tax advice in Sri Lanka.) (tpp.lk)