Condominium developers become victims of ‘inflation of greed,’ says industry

• Say developers have been unjustly targeted by building materials suppliers with mammoth price increases 
• Says further taxation on condominium sector will bring it to ground; urges govt. to multiple layers of para tariffs on industry 
• Also calls for the change of perception that condominiums and apartments are ‘luxury developments’

Condominium developers are struggling to move forward with their operations as they have become victims of ‘inflation of greed’, industry stakeholders said.
The developers alleged they are being held​​ hostage by suppliers of building materials, fittings, fixtures, and even services to an extent that the continuity of this vital sector of the economy is under serious threat.

“What is most ironic is that some of the primary materials are manufactured in Sri Lanka and others have a high degree of local value addition and are thereby not impacted by the exchange rate or increases in freight charges. 
Nonetheless, these too reflect and share the skyrocketing inflation of finished imports,” the Condominium Developers Association of Sri Lanka (CDASL) said in a statement to the media.

It pointed out that many sections of trade and commerce are experiencing this ‘inflation of greed’ where profits are ‘inflated’ in total disproportion to an increase in costs.
Whilst the US dollar has doubled vis-a-vis the Sri Lanka rupee, and so have freight rates, which have increased by about 200 percent, the overall impact on CIF prices is considerably lower, averaging about 10 percent of FOB depending on density.

“These increases do not by any means translate into the unconscionable increases that are evidenced across a spectrum of products,” the association pointed out.
Floor tile prices that were Rs. 150 sq. ft in 2021 are today at Rs.450-600 and have a delivery time of four months with no guarantee of prices being held. Steel, which was Rs.110,000 per tonne in 2021 is now Rs. 450,000, cement at Rs. 800 per bag is now 3,100 and fittings and fixtures are regularly showing over 500 percent appreciation.

To alleviate the situation, the CDMA had put forward four solutions. The first is to acknowledge that further taxation such as the re-imposition and increase of input VAT and Social Security Levy are short-sighted, ineffective, and ill-thought-out measures that will have an effect contrary to their objective.

The second is the rationalisation of multiple layers of para tariffs, such as PAL, CESS, Excise Duty, etc.
The third is to review the protectionist measures, and revisiting of negative lists and restrictions, which severely impair quality standards.
The fourth and final suggestion is to step up efforts in changing the mindset that condominiums and apartments are ‘luxury developments’ and are for the rich. 
“Condominiums are the solution towards cost-effective conservation of resources and the enhancement of low/middle-class urban lifestyles country-wide,” the CDASL said.

It also stressed that the need of the hour is for the Urban Development Ministry and all its satellite departments, the Finance Ministry, and the banking sector to adopt more of a supporting role than that of restriction and control.
The association also called on policymakers and relevant authorities to prioritise condominium developers as they can help contribute in the revival of the economy. The developers expressed confidence in the condominium industry, with little effort, but subject to an enabling framework, generating as much as US$ 150 million or 20 percent of realistically achievable FDIs.