Quotes of the Day

It wasn't so long ago that tourists tried their best to avoid troubled Sri Lanka. Tour operators still remember the grim conditions of more than a decade ago when constant terrorist attacks led to wholesale cancellations. Less than two years ago, separatist guerrillas attacked the visitorpacked international airport—blowing up half of all the national carrier's aircraft and killing 17 people. Asia offered other, safer sun-kissed destinations; travelers disparaged Sri Lanka as "the poor man's Bali."

Those roles are now reversed. Bali is trying to recover from the devastating October bombings that killed 193. In the meantime Sri Lanka has experienced more than a year of peace thanks to a truce between the government and the Liberation Tigers of Tamil Eelam. Tourist arrivals hit 393,000 last year, nearly returning to pre-civil-war levels. And some visitors are finding the country's Buddhist sites and exquisite beaches so charming—and safe—that they want to claim a permanent piece of paradise. A mini property boom on the southern coast has begun.

The center of the frenzy is the unspoiled Galle Fort, a unesco World Heritage site in the city of Galle. Protected behind the ramparts of a 17th century Dutch citadel, the area seems like something out of a time warp, featuring homes with verandas and an array of picturesque churches and mosques. There are fewer than 200 homes inside the fort, and in the past several years adventurous foreigners have purchased more than 40 of them. In many parts of the tropics, tourists are accustomed to being accosted by cyclo-drivers hawking all sorts of illegal temptations. In the fort, though, the inevitable refrain is, "Mister, you like to buy a nice house?"

Two years ago, an unmodernized four- or five-bedroom house in the Galle Fort could be purchased for less than $50,000. Prices have since trebled, often with multiple bids made on the same property. Previous restrictions on foreign ownership of property have been eased, allowing any profits to be repatriated without penalty.

Charles Hulse, a septuagenarian American from Arkansas and a veteran Galle Fort realtor, lived for years between Paris and the Greek Isle of Hydra before settling in a tastefully restored Galle Fort house with interiors fit for Architectural Digest. Hulse warns that the cost of restoring a fort house usually runs to 50% of the purchase price. "It is all very well to get a wonderful house near the ramparts for a song but unless you have someone on the spot to advise you and hold your hand, there are all sorts of problems that can cause major headaches." And cost thousands of dollars.

Another key player in the tourist renaissance of Sri Lanka is Hong Kong publisher Geoffrey Dobbs. He has restored two historic mansions in Galle: the Sun House and the Dutch House, which offer the most luxurious colonial accommodation to be found anywhere on the island. He also rents out Taprobane, a jewel of an island only a hundred meters or so off the surf at nearby Weligama (once owned by American writer Paul Bowles) that is about 30 kilometers east of Galle, and has another beach retreat an hour away at Tangalla also on the southern coast. Apart from introducing beach elephant polo, Dobbs is now planning to open a boutique yacht club because there isn't a single one between the Suez Canal and Phuket. "I now term this part of southern Sri Lanka as the Serendip Riviera. The stretch from Galle to Tangalla will in time become the best address in the Indian Ocean." Amanresorts, the ultra-chic chain run by Adrian Zecha, is moving in too. Zecha is restoring Galle's New Oriental Hotel, a 300-year-old Dutch barracks that was converted into a hotel by the British in the early 19th century. During the civil war, visiting foreign correspondents were usually the only guests in this museum of Dutch-colonial furniture and cavernous suites that cost less than $30 a night. Zecha is negotiating with the government to take over other colonial properties and is creating a new beach resort on Tangalla. If you're searching for your own slice of paradise in Sri Lanka, now's the time to get out your wallet.

• Bruce Palling
• The peace dividend: Sri Lanka's real estate gets hot