Post-crisis construction interest surpasses economic boom levels: Industry

• Says bigger players have taken crisis as an opportunity to enter market
• Points out smaller players will take time to gain confidence
• Shares there had been a gradual increase in consumption over the past six months, largely due to consumers adjusting to new and higher price points

Sri Lanka’s construction industry, crippled by poor policies and crisis events, is bouncing back with renewed vigor, industry leaders said, as they see a surge in interest surpassing even the boom times of economic growth.

While this signals a hopeful turnaround, improvements are already being seen on the ground, they noted.

“The private sector is investing in big projects. The bigger players have taken this crisis as an opportunity to enter this market with fewer obstacles,” said Access Engineering PLC Executive Vice Chairman J.C. Joshua. 

“We are seeing private sector investments in petroleum, ports, and now renewable energy, at levels not witnessed even during economic booms. This is good.”

Public sector spending on infrastructure projects is also increasing, possibly influenced by upcoming elections. Joshua noted that with bilateral debt restructuring, the industry sees promise, as stalled projects recommence. 

“The value these stalled projects can bring is close to US$ 2.5 billion, which will have a huge positive impact on the market,” he added.

Joshua shared his views during a discussion, hosted by Capital Alliance (CAL) on Sri Lanka’s construction sector outlook, alongside Insee Cement CEO Jan Kunigk and ACL Cables PLC Chief Financial Officer Mahesh Amarasiri.

Reflecting similar sentiments, Kunigk expressed relief that the industry is recovering with the resumption of larger projects but noted it will take time for smaller builders to gain confidence. 

“Some bigger projects are coming up, but disposable income across the country is very low. Existing interest rates, although significantly lower than 12 months ago, are still not attractive enough for house builders to get a mortgage,” he said.

He pointed out that financial institutions are more selective in extending loans, but with lowered interest rates and a reduced gap between inflation and disposable income, further improvement in construction activities is expected.

Amarasiri noted a gradual increase in consumption over the past six months, attributing it to consumers adjusting to new, higher price points. 

“Consumers have seen prices increase and decrease. Now, there is price stability in the industry, and stakeholders are psychologically okay with the new price points. With lower interest rates, we see an increase in capital expenditures, especially on maintenance activities,” he said.

Despite positive developments, Amarasiri pointed out that there is still significant room for growth. 

The Construction PMI has been above 50 since December 2023, indicating an expansion of activity. However, a Central Bank report showed that while employment in the sector continues to contract, it is at a slower pace, as firms remain cautious in hiring.