Crisis looming large in Lanka construction industry

Sri Lanka’s construction industry is now in a crisis mode, thanks to the increase of building material costs by 10 to 15 percent in the recent past owing to the depreciation of rupee against the dollar along with the hike in transport cost due to recent fuel prices increases. 

"It is sad that 90 percent of raw materials for the construction industry are being imported and the devaluation of rupee has resulted in the increase of the cost of raw material by 10 per cent to 15 per cent. In addition the recent fuel increase also adds insult to injury," President of the Chamber of Construction industry of Sri Lanka Surath Wikramasinghe said.

He said that due to the increase of construction cost would mainly affect those contractors who had already contracted at early prices, in which case they had either to renegotiate with their clients or go for litigation to avoid losses. Wickramasinghe said that contractors now had to adjust their future projects by 10 per cent to 15 percent, which was a major increase when it comes to massive construction projects in the country He said that fixed price contractors were now going through a difficulty due to the price escalations in raw materials and such contracts cover considerable number of such projects in the country. Therefore, some workable solution was needed to protect them from financial ruin.

To cushion the blow from the cost increase the Chamber was now in the process of suggesting a workable solution for the government by also taking bank interest rates also into consideration, because the most of construction projects have raised funds through bank loans, he said. Cement which was one of the main components in the construction industry has gone up price due to the increase of the dollar against the rupee. The current increase would be between Rs. 5.00 and Rs. 10.00 per bag and added that a further price hike would take place after the next consignment of cement was imported into the country, industry sources said.

According to the 2011 International Construction Cost Report, India and Sri Lanka share the 13th position for the most expensive countries in Asia to build, and are placed 55th in the World. Japan, Hong Kong, Singapore, South Korea, Macau, Thailand, China, Malaysia, Philippines, Vietnam, Indonesia and Taiwan are ahead of India and Sri Lanka.

The report released by built asset consultancy, EC Harris has named Japan, Hong Kong and Singapore as the most expensive places in Asia to build and are amongst the world’s top twenty most expensive countries.