Cyclone Ditwah and the reckoning facing Sri Lanka’s property sector

By Dr D. Prathapasinghe

The Cyclonic Storm Ditwah has left a profound imprint on Sri Lanka’s physical landscape and national psyche. The upcountry and central highland regions, long regarded as among the safest for settlement, agriculture, tourism, and long-term property investment, have endured some of the most severe devastation in recent memory. Collapsed homes, ruined plantations, severed roads, and entire communities displaced or still unaccounted for have become grim realities.

While the immediate humanitarian response must remain the country’s foremost priority, Sri Lanka must also confront Cyclone Ditwah’s deeper and longer-term consequences. The cyclone is not merely an environmental disaster; it is a defining moment that will reshape how the nation plans, develops, values, regulates, and finances real estate in the years ahead.

A Disaster Amid a Fragile Economic Recovery

The cyclonic storm struck at a particularly delicate juncture. Following the economic collapse of 2022, Sri Lanka entered 2024–2025 with cautious optimism. Inflation had eased, foreign reserves were improving, and the property market, especially in Colombo and key regional centres, was showing early signs of revival. Consumer sentiment, though still fragile, was beginning to stabilize.

Ditwah has now delivered a sharp setback to this recovery. Disasters of this scale impose immense strain on government finances, household savings, infrastructure systems, insurance markets, and the banking sector’s credit-risk profile. The property market, deeply interconnected with all these areas, will inevitably absorb these shocks.

Immediate and Structural Impacts on the Property Market

The effects on real estate are already visible. Large parts of the upcountry and flood-affected districts have experienced total or partial loss of housing stock, structural failures, land erosion, slope instability, contamination of water systems, and the loss of access roads. Until safety and stability can be scientifically re-established, property values and market confidence in these areas will remain suppressed.

Beyond physical damage, disasters also reshape buyer psychology. Global experience from New Orleans to Queensland, from Japan to Kerala, shows that demand gradually shifts away from vulnerable locations toward areas with stronger geological stability and resilient infrastructure. Sri Lanka is likely to follow the same trajectory. Properties on stable terrain, elevated land, and within regulated developments supported by strong engineering documentation will command greater interest. Conversely, informal or poorly regulated developments, particularly in high-risk zones, may face prolonged value erosion.

The cyclone has also reinforced the importance of professional valuation and technical due diligence. Buyers, lenders, and insurers will increasingly depend on geotechnical assessments, hazard mapping, engineering certifications, environmental evaluations, and valuations aligned with Royal Institution of Chartered Surveyors (RICS) and International Valuation Standards (IVS). Where risks cannot be sufficiently mitigated, markets will adjust through lower valuations, tighter loan-to-value ratios, higher insurance premiums, or more restrictive lending conditions.

Changing Customer Perceptions

Consumer expectations around property are undergoing a fundamental shift. Safety will now outweigh price, convenience, and even brand appeal. Prospective buyers are likely to seek guidance from valuers, engineers, geologists, insurers, and environmental specialists before committing to purchases. Insurance, particularly flood and natural disaster cover, is also poised to move from being optional to essential. In future, both lenders and buyers are likely to treat adequate insurance coverage as a prerequisite for property transactions rather than an afterthought.

Implications for Collateral Lending and the Financial Sector

The financial sector faces a parallel set of challenges. Banks and non-bank financial institutions hold thousands of properties as collateral. Ditwah introduces new uncertainty around asset stability, marketability, and long-term value. Lenders may be required to reassess valuations, tighten credit criteria, reduce exposure in high-risk zones, and mandate insurance or technical certifications before approving mortgages.

Existing loan portfolios may face impairment where properties have suffered structural or environmental damage. In many affected regions, limited insurance coverage shifts the financial burden onto households and lenders alike. As global financial systems increasingly integrate climate risk into lending decisions, Sri Lankan institutions are likely to follow by adjusting loan pricing, revising loan to value (LTV) ratios, and applying risk-weighted capital requirements based on hazard exposure.

How Developers Must Rethink Their Approach

Developers, too, must adapt to a changed market. Buyers are no longer satisfied with visual appeal and location alone; they increasingly demand proven structural integrity, transparent documentation, and verifiable resilience. While climate-adaptive construction may involve higher upfront costs, such developments are more likely to retain long-term value, attract lender confidence, and earn sustained buyer trust.

Investor preference is also expected to shift toward sites with stable topography, reliable infrastructure, and demonstrable resilience features. In this new landscape, quality and safety will become decisive competitive advantages.

The Urgent Need to Modernize Planning and Building Regulation

Cyclone Ditwah has exposed long-standing weaknesses in Sri Lanka’s planning and regulatory systems. Decades of unregulated or weakly enforced development have seen settlements expand into river reservations, unstable hill slopes, reclaimed wetlands, and irrigation buffer zones. In many cases, approvals have relied on outdated land-use plans and hazard maps that no longer reflect the realities of climate variability, deforestation, or changing soil conditions.

This disaster must serve as a turning point. Sri Lanka urgently needs a climate-resilient planning framework anchored in updated hazard zoning, compulsory risk assessments, preservation of natural drainage systems, and the integration of green infrastructure. Digitized approval processes can also reduce discretion, improve transparency, and strengthen compliance. Without such reforms, reconstruction risks repeating the same vulnerabilities that led to this crisis.

Professional Responsibility and a Safer Built Environment

Cyclone Ditwah casts a sharp spotlight on the responsibilities of built-environment professionals. Engineers, planners, architects, quantity surveyors, land surveyors, valuers, environmental specialists, and construction professionals collectively shape the safety of Sri Lanka’s physical landscape. Their roles are now more consequential than ever.

This disaster underscores the need for a renewed professional ethic grounded in competence, accountability, and integrity. Engineers must ensure that designs meet rigorous safety standards, particularly in slope stability, drainage, and foundation engineering. Planning professionals must assess applications against hazard data without yielding to convenience or political pressure. Architects must embed climate-adaptive principles into design, while environmental assessments must move beyond procedural compliance to genuine scientific evaluation.

Valuers also carry heightened responsibility. Risk-adjusted valuations that reflect geological, environmental, and climate-related factors are essential for responsible lending, insurance underwriting, and market transparency. Within RICS and IVS frameworks, valuers are required to assess the highest and best use within the context of safety, legal compliance, and sustainability considerations that now carry greater weight than ever.

Professional bodies such as RICS, the Institute of Valuers of Sri Lanka (IVSL), Institution of Engineers Sri Lanka (IESL), Sri Lanka Institute of Architects (SLIA), Institute of Quantity Surveyors Sri Lanka (IQSSL), and the Institute of Town Planners must strengthen continuing professional development, promote climate risk competency, and enforce disciplinary standards. Above all, collaboration, not siloed expertise, must define the future. Engineers, valuers, planners, insurers, financiers, and policymakers must work together to rebuild confidence in the safety of the built environment.

How Government and Policymakers Must Respond

Cyclone Ditwah compels policymakers to fundamentally rethink development control, land management, disaster preparedness, and housing policy. Incremental reforms are no longer sufficient. Hazard maps for floods and landslides must be scientifically updated and adopted as mandatory reference tools for all planning and building approvals, integrated across the National Building Research Organization (NBRO) and Urban Development Authority (UDA) frameworks, and made accessible through public digital platforms.

Enforcement must be strengthened. Construction in high-risk zones, such as riverbanks, unstable slopes, and wetlands, cannot continue unchecked. Political neutrality, stronger penalties, and better institutional coordination are essential.

Building regulations must also evolve. Revised codes should incorporate higher standards for foundation engineering, drainage capacity, material resilience, and structural reinforcement. Public infrastructure must be designed for a climate characterized by more intense rainfall and extreme events. Incentives such as concessional finance, tax relief, or fast-track approvals for compliant developments could accelerate safer construction practices.

 Climate risk must also be embedded in financial regulation. Guidance on climate-adjusted lending, collateral valuation, mortgage insurance, and portfolio stress testing is urgently needed. A national disaster insurance framework, developed with insurers and international partners, would provide critical protection for households and financial institutions alike.

Finally, natural infrastructure such as forests, wetlands, watersheds, and riverbanks must be recognised as national assets. Their preservation is not merely environmental stewardship but a frontline defence against future disasters.

A Turning Point Sri Lanka Must Not Waste

Cyclone Ditwah has taken lives, displaced families, and damaged infrastructure across vast regions. Yet it also presents Sri Lanka with a rare opportunity to confront long-standing weaknesses in its built environment and property market. The nation must resist the temptation to rebuild quickly at the expense of rebuilding wisely.

If Sri Lanka commits to long-term reforms in planning, valuation, development, lending, professional practice, and public awareness, Cyclone Ditwah may ultimately become the catalyst for a safer, smarter, and climate-resilient future. The choices made now will shape the security and prosperity of generations to come.

– Dr D Prathapasinghe, FRICS, is a Chartered Valuation Surveyor and Fellow of the Royal Institution of Chartered Surveyors (RICS), with over three decades of professional experience in real estate valuation, advisory, and built environment consultancy. He is the Managing Director of Prathap Chartered Valuation & Consultancy (Pvt) Ltd and currently serves as Chairman of RICS Sri Lanka. He is an active industry thought leader, academic researcher, and conference speaker, with research interests spanning property valuation, development economics, ESG integration, and risk-informed planning and development. He can be contacted at dprathapasinghe@gmail.com