Sri Lanka’s economic recovery is spilling over into its construction industry and Chief Operating Officer of Siam City Cement Thusith Gunawarnasuriya is optimistic about the industry’s revival.

During a recent LMDtv interview he noted that “the construction industry went through a rough period over the past two years because of macroeconomic issues. Both retail and infrastructure usage had dropped and the industry was experiencing negative growth. However, stabilisation and a positive sentiment towards construction is evident this year.”

Gunawarnasuriya continued: “Construction is driven by GDP etc.; and with the government’s ambition to grow the country’s GDP by about five percent in 2025, we expect the industry to catch up. Even if it doesn’t reach pre-2023 levels, it’s possible that construction will see at least seven or eight percent growth in some sectors, which will drive overall growth of about five percent.”

The major portion of it is expected in the form of infrastructure development. He explained: “In the recent national budget, the government allocated money for infrastructure development such as roads, bridges and rural projects related to water sanitisation ,and other aspects too. So industry may grow faster than the retail sector.”

Gunawarnasuriya asserted: “Individual house builders who dominate the retail sector went through economic challenges in terms of their personal finances in the last couple of years. And since many people have migrated, there’s less demand for retail property and real estate development now.”

However, the demand for condominiums and apartments is expected to grow, and whatever had only been partially built is now being completed.

He added: “Many partially constructed projects in Colombo and suburban areas are driven by local companies and large-scale entrepreneurs. The cash flows of these projects are either through pre-sold properties or partial payments. When construction is suspended midway, it has a major impact on investors as well as clients who have already paid an advance or are waiting to occupy their homes.”

“It’s not good for the economy and the environment because partially constructed buildings pose fire and health hazards, including the spread of vector borne diseases such as dengue. So it’s essential that these projects are completed,” he urged.

The cost of construction is also reducing. To this end, Gunawarnasuriya noted that “the economic crisis and devaluation of the Sri Lankan Rupee caused construction material costs to increase substantially.”

“While there are some locally manufactured construction materials, 10 to 20 percent of the materials needed for civil construction are raw materials such as cement, and steel aggregates. There are also finishing items, which add about another 30 percent to the cost. And around 40 percent of construction costs are labour related – they include the services of masons, helpers, contractors etc.,” he added.

Gunawarnasuriya continued: “We see a reduction in material prices because the rupee has stabilised and import costs have dropped. However, the cost of labour, which has almost doubled, doesn’t seem to be coming down.”

Labour is also scarce in the construction industry. “About two million people used to be employed in construction but with the collapse of the industry, it dropped to a little above one million. Since many people lost their livelihoods, they opted to work in others areas of employment and several skilled workers have migrated,” Gunawarnasuriya lamented.

Yet, the overall picture is positive. “We see large-scale projects beginning and there are opportunities in terms of foreign direct investment. And the tourism industry is showing a lot of promise with the need for many more rooms and restaurants. I think the next two to three years is going to be good for the construction industry with lots of positive sentiment transforming into demand,” he concluded.