Construction sector to rebound after Easter attacks

The government, in a bid to purge the pessimism created through the recent terror attack in April has settled Rs. 70 billion worth overdue payments to the Central Expressway contractors while concessionary loan schemes and lower interest rates for home builders to restore stalled construction will be rolled out in the next few quarters, officials say.

Construction which is the highest contributor to the industrial sector saw an encouraging growth of 7.6 per cent year on year in Q1’19 but owing to delayed operations and terminating of certain projects this contribution will drop in the second quarter, analysts say.

“The third quarter will reflect the release of government funds on outstanding payments for construction consultants and contractors,” a stock market analyst said noting that increased salary increments to government servants (to start from July’19), the much stable rupee which appreciated by nearly 4 per cent year to date along with reduced import costs and the recent price increase for cement bags are likely to cushion overall margins in construction firms, he said.

With some firms including high rise builders managing to negotiate grace periods for most long- term loans to somewhat offset the negativity slapped by higher finance costs, they will bounce back. Some apartment builders told the Business Times that inquiries, which had dropped to zero following the attacks in April, are increasing now. “But it will be sometime before we can get above water,” a builder added. None has reduced prices. Last year, house prices surged 17 per cent nationwide during 2018 (16.3 per cent inflation-adjusted) to an average of Rs. 34.03 million, according to LankaPropertyWeb. In 2018, residential market’s gains were partially offset by the 15 per cent depreciation of the rupee.

The country has seen many international companies and partnerships entering luxury residential and mixed-development projects in the Colombo, coastal and central regions. Sri Lanka’s real estate potential has tripled since the end of the civil- war in 2009 with analysts saying that only 7 to 8 per cent apartments in Colombo district enhancing the case for high rises further.

Currently, there are over 900 apartment complexes in the country having over 15,000 residential units while another 200 condominium projects are in pipeline with over 13,000 residential units.