Construction in crisis, but property soaring says Central Bank

Sri Lanka’s troubled construction industry remains depressed with hardly any new work and companies are shedding employees at a higher rate, according to the latest figures released by the Central Bank.

However, a gradual decline in raw material costs provided a “conducive environment for the limited ongoing projects,” the bank said while releasing its Purchasing Managers’ Index for the construction industry.

“Employment decreased further during the month (of July) since firms tend to retain only the key staff. Further, quantity of purchases continued to decline during the month as most of the firms are in a wait-and-see stance, only fulfilling the short-term requirements,” it said.

While construction remained sluggish with many building projects on hold, the Central Bank reported a surge in property values, a claim disputed by many in the industry.

The bank said the Land Valuation Indicator for the district of Colombo surged by 15.2 percent in the first half of this year. Values rose for residential, commercial, and industrial properties, according to the bank.

A top real estate developer said the central bank figures may reflect a handful of “special transactions” but was not representative of the behaviour of the property market.

He said most luxury apartment developers have not been able to sell any of the top-end apartments in the past three years while the demand for mid-range units was also subdued.

Astronomical interest rates meant that prospective homeowners were not keen to take on expensive mortgages, industry officials said.

What was initially advertised as landmark luxury buildings in Colombo have been unable to complete construction while those moving slowly are already several years behind schedule.Developers have run out of cash and were unable to raise new funding as banks have also stopped financing them.