Construction and real estate activities continue to add more heft defying pandemic

• Expands by 18.2 percent in the three months to June 2021 from a year ago
• Highest growth since the first quarter of 2016, marking a sharp recovery from 30 percent contraction recorded in 2020 second quarter 

Sri Lanka’s construction activities delivered their fastest growth in five years during the quarter ended June 2021, while the complementing real estate activities continued to add strength into its growth, reflecting that the two interconnected sectors remain largely resilient since the initial setback suffered during the virus outbreak last year. 
Sri Lanka’s constriction and real estate activities, which include ownership of dwelling, accounted for 12.1 percent of the total economic output of Sri Lanka by the end of June 2021.   

According to the latest data made available by the Department of Census and Statistics (DCS), Sri Lanka’s construction activities which were spared from the pandemic induced lockdowns for the most part by the government has expanded by a robust 18.2 percent in the three months to June 2021 from a year ago while making 6.3 percent to the total economic output. 

This is the highest growth since at least the first quarter in 2016, and marked a sharp recovery from the 30 percent contraction recorded in the second quarter in 2020 when the first wave of the virus triggered widespread restrictions on economic activities including the temporary closures of constriction sites. 

However, since then the government designated construction as a priority sector in line with exports and other essential services and allowed it to function unabated irrespective of the restrictions which had to be imposed from time to time to stem the virus flare ups. 

The 18.2 percent jump in the 2Q21 came after a more modest 3.4 percent growth in 1Q21 and the low base effect in 2020 was a primary reason for the surge in the 2Q21. 

However, the strength of construction activities in the country taking place by way of both public infrastructure projects and private developments, also corresponded with the equally robust cement supply and the imported building materials in the same period. 

For instance, cement imports and production, a close proxy for a country’s construction sector heft logged increases of 11.68 percent and 33.83 percent respectively during the quarter from the same period last year. 
Further, the total value of imported building materials has also soared by 61.7 percent in the quarter from the year earlier period. 

Meanwhile, real estate activities, which account for 5.8 percent of the total economic output by the end of the 2Q21 expanded by 5.5 percent from a year ago levels reflecting that conditions mostly favourable for housing such as the lowest interest rates and the growing hunt for shelters by the aspiring middle income class kept the country’s housing market hot despite the pandemic induced restrictions. 

The soundness of the real estate market across luxury, affordable luxury and below was reflected from the financial performance of listed property developers during the first six months of the year and the higher appetite for apartment purchases as reflected in the condominium survey conducted quarterly by the Central Bank.