The short-term impact of the COVID-19 pandemic induced curfew on the construction industry was fairly significant, according to Sector Head of the Property Group at John Keells Holdings Nayana Mawilmada.

With construction sites shut down for more than two months, many have been looking to recommence with the pace of the reopening being impacted by developers adopting a wait and see approach.

“It’s too early to tell what the ‘new normal’ for the construction industry will be on a long-term basis but safety protocols mandated by the government have been put in place,” he assured, pointing out that reducing the number of staff at sites will not impact the approach to construction but the speed of completion.

With several properties under development geared for tourism and entertainment purposes being subjected to physical distancing regulations, he noted that the construction of such projects should not be structured for peak pandemic scenarios – but rather, calibrated for stabilised situations, which may not materialise for several months.

Mawilmada does not anticipate changes in urban real estate development trends: “The fundamental forces of the expansion of cities will continue to drive people into urbanised housing.”

“Globally, there may be a minor drift in major metropolises but cities have been built because people enjoy contact and this trend is likely to return,” he asserted.

Commenting on the local context, he explained that Sri Lanka’s problems continue to be the same as before with less than 10 percent of the population living in apartments and congestion issues persisting.

Furthermore, he remarked that Sri Lanka lags behind the region in terms of urbanisation and densification.

Among the challenges Mawilmada highlighted in relation to the country’s real estate market are affordability – particularly for middle income buyers: “For younger first time home buyers and other middle income professionals, access to mortgages is a challenge; interest rates are high and banks are wary about lending so it has been prohibitive.”

In his view, this challenge has become more acute in the prevailing climate with affordability being impacted further by pay cuts. To address this, he calls for the government to stimulate the mortgage market with a focus on younger first time buyers.

Despite these short-term challenges, he expects the market to rebound as the economy recovers.

As for the impact of the pandemic on property values, Mawilmada explained that this has been difficult to gauge due to the limited transactions taking place at the time: “A drop in rents would be expected but there are questions with regard to how long this would be an issue as short-term blips would not affect overall values.”

Elaborating on this assertion, he affirmed that the real estate market is one in which investors would rarely lose substantial sums as property is considered a stable asset class for those who take a long-term perspective.

As economic recovery continues to be a concern for Sri Lanka, Mawilmada stressed the importance of ensuring that finance is accessible and affordable to customers – especially those in the middle and upper income segments.

Moreover, he cited the need for policies to help manage costs in the industry: “It is subject to substantial taxes in addition to construction costs.” He added that this means overall costs are much higher in Sri Lanka compared to the rest of the region so “measures are needed to ensure that developers can provide more affordable products.”

Offering his outlook for the industry, Mawilmada stated: “The next few months will be slow for the construction industry and the outlook will depend on how quickly the country stabilises.”

“However, the fundamentals for the medium to long term remain strong, and development parameters of cities and interest from Sri Lankans living abroad could point to us doing well,” he concluded.