Constructors' fear being shaken to the foundation
Amidst escalating prices, non-availability of materials, more than 100,000 lose jobs as Govt stops major projects
The Government's decision last week to halt all ongoing construction projects will result in massive financial losses to the industry, deprivation of tax revenue to the state, and large-scale unemployment, industry sources warned.
It is estimated that more than a million working on government projects across the country will lose jobs.
The National Construction Association of Sri Lanka said that already the escalation of prices and non availability of building materials had slowed down projects. Job losses add up to 45,000 masons, carpenters, and other minor employees.
“If it (the suspension) continues for more than three months, even the white collar workers have to be laid off,’’ the association president, Susantha Liyanarchchi, said.
The Government decision means several big projects including those by the Road Development Authority, pipeline laying by the Water and Drainage Board, and school buildings under the 'nearest schools the best school' programme will stall. New projects will not be started. A communique has been sent out to all ministries and departments.
Last week, the Government had a discussion with contractors on its ongoing projects to announce the decision.
Mr Liyanarchchi said contractors understood the situation.
However, he said that halting construction projects would mean no tax and revenue to the country's coffers. The industry contributed 7.1% to the economy in 2021.
The Government owed around Rs.100 billion to contractors over a year for finished projects.
Last month, the state was able to only pay Rs. 102 million. This was divided among 67 contractors.
The Chamber of Construction Industry, an 'exclusive voice’ for the excellence of the industry, painted a gloomy picture and said that about 100,000 minor workers have lost their jobs.
He said construction is impossible because of the shortage of cement, steel, floor tiles and other building materials.
Although the official price of cement was Rs. 2,750 for a 50 kilogram bag, the scarcity has driven the price to Rs. 4,500. The price of cement in December 2021 was Rs. 1,275, but it has doubled since.
Industry group head, Colonel Nissanka Wijeratne said that the Lanwa Sanstha Cement Corporation (Pvt)
Ltd, a BOI venture in Hambantota which started with the blessings of the Government in March, has not produced a single bag for the domestic market.
Steel prices have
more than doubled in the past four months because of the depreciating rupee.
A type that was sold at Rs 250,000 a metric tonne, now costs Rs. 370,000, and another that was Rs. 595,000 a metric tonne, is selling at Rs. 760,000.
For floor tiles, contractors are having to pay upfront and wait up to two years for delivery. Imports are banned and Sri Lankan producers can only meet 30% of the demand.
Bathroom fittings and fixtures are also in short supply.
Condominiums and apartment projects also have come to a halt.
Condominium Developers Association’s B. Premalal, said the business had suffered immensely because of the rupee devaluation.
Prices quoted two years ago have now almost doubled. The price of some items have risen by 300%.
“It is not only the US dollar appreciation.
Most traders are capitalising on the situation by creating a scarcity and doubling and trebling the prices. Even big companies are into this. For instance, the price of ceiling fans has hit the roof. We cannot absorb. Some companies are giving quotations that are valid only for 24 hours. The value keeps changing,’’ he said.
Now, condominium builders have started negotiating with customers. Projects estimated to take six months are re-assessed at current prices.
Many small-scale builders have given up business, while others are focusing on completing the ongoing projects. Other contractors are not taking up new ventures.
To avoid further losses, businesses are quoting prices in US dollars.
For expatriates who buy homes, it will be cheaper.
Locals also can buy and pay in rupees, but the amount will be in terms of the conversion of dollar to the rupee at the time of payment.