Compiled by Yamini Sequeira
WHERE THE SKY IS THE LIMIT
Christopher Joshua is enthusiastic about construction industry prospects
Q: Is Sri Lanka’s real estate sector attractive to overseas investors as far as repatriating funds, exchange rates and so on are concerned?
A: There has been substantial capital appreciation along with reasonable rental yields for investors especially in properties within the City of Colombo. Capital appreciation has certainly outweighed any adversity posed by exchange rates.
Today, investment funds brought in through securities investment accounts can be repatriated along with profits without constraints.
Q: How could investment in the real estate sector be sustained?
A: Overseas investors remain a minority in purchasing condominium units despite substantial capital appreciation and have many choices in terms of which part of the world they want to invest in. Therefore, more incentives such as granting resident visas would be an important step to attract investors to this sector.
Q: What is your take on the state of play in the construction industry today?
A: Currently, the construction industry is undergoing a growth phase and making a valuable contribution to the nation’s industrial sector. This year will be marked by a phase of implementation for mega projects.
The industry is positioned favourably and would display continued growth momentum if not for the fact that several mega projects were put on hold for review in 2015. However, it is encouraging to see that some of these projects have recommenced.
Q: Are local construction companies garnering a fair share of the pie vis-à-vis mega projects?
A: There are two main channels of funding for major infrastructure projects by the state sector – viz. bilateral and multilateral.
It is possible for local construction companies to bid for tenders in the case of multilaterally funded projects. However, bilateral projects are granted to foreign contractors from the country in which the funding originates although the local industry or sector does gain a smaller slice of the pie through subcontracts.
Q: How do you react to concerns of a glut in the condominium market?
A: We believe the concern that there is excessive construction in the city is unfounded. When you round up the numbers, the density is nothing compared to other similar cities. A total of about 10,000 condominiums are currently occupied while around 5,000 more are under construction.
Q: Should alarm bells be ringing over environmental concerns given the hectic pace of construction activity in the commercial capital?
A: There are no urgent environmental concerns for commercial construction as most companies adhere to industry standards pertaining to the environment.
The challenges lie in the provision of utility services such as stormwater drainage, sewerage and solid waste disposal. There has been some debate over environmental concerns with respect to the Colombo International Financial City or CIFC (Port City). However, since CIFC is a greenfield project, it would certainly have taken all environmental factors into consideration.
Activists have expressed concerns but it is important to keep in mind that with agencies such as the Asian Development Bank (ADB) involved in funding the construction of the five kilometre breakwater for the Colombo South Harbour, which is acting as the northern sea boundary of the Port City, all possible negative environmental impacts would have been assessed and mitigated.
Q: What are the main challenges facing the construction industry?
A: Technological development is advancing rapidly and it is incumbent on industry players to stay abreast of these changes. But the lack of labour and materials remain critical obstacles to growth. The industry is pushing to make itself more attractive to young people by conducting training workshops and offering attractive salary packages.
Q: Apart from construction, which other industries do you perceive to have potential?
A: Besides real estate, I foresee tourism and the leisure and entertainment sectors growing at an impressive pace. The private sector will need to play a critical role in developing these segments further.
Q: Are there any significant trends in real estate and construction?
A: The foremost trend is to opt for condominium living. Considering the sky-high prices of land in Colombo, investors find it easier to purchase condominiums. Unfortunately, a high interest rate regime means that borrowing costs are also high.
In general, expatriates who acquire real estate in other countries seek planned cities to invest in – therefore, we believe that there’ll be a high level of interest in the Port City as it will be a modern planned development; the Port City will prove to be a game changer.
Q: How do you view prospects for the local construction
A: We are optimistic about the next five years. This is because we foresee massive growth in the industry with even larger projects in the pipeline. Substantial private sector investments in real estate have led to innovative construction methods and materials.
Looking ahead, we believe that the industry must continue to innovate and develop a competitive edge.