Blue Ocean Group positioned financially, operationally and culturally to transform the construction and real estate industry
The real estate giant is all geared up to meet any challenges from the future
The COVID-19 pandemic has defied most economic predictions and taken a toll on the global economy, with a significant effect on most industries. While the world has not yet fully emerged from the pandemic, it is definitely in a better state than the previous years. This is true to most industries as well as the real estate and the construction sector which were braving the waves of uncertainty the pandemic has brought forth.
Sri Lanka and its potential
A country’s economy goes hand in hand with the real estate and construction industry. And particularly in Sri Lanka, the country has seen the capacity for exponential growth if concentrated on foreign direct investment. In fact, in the recent years, Foreign Direct Investment (FDI) into Sri Lanka grew to over $1,710 billion including foreign loans received by companies registered with the BOI, more than doubling from the $801 million achieved the previous year. However with the pandemic and subsequent decline in the country’s economy, this growth seems to have been stunted over the recent years. Can the local market bridge this gaping hole left behind by the decrease of foreign direct investment into Sri Lanka? Let’s have a look.
The construction and real estate industry today
Real estate has been seen to appreciate at an above-average rate from mid to late 2021 due to increasing material prices such as cement and steel and also the increasing demand for houses and apartment condominiums. Despite this, the industry saw a significant boost in sales from both local and foreign investors in mid-2021. There is however, a shortage of housing units, as the home has now become the centre of remote workers’ world which represents the majority of the population and demand.
Some are looking to take advantage of the newly introduced remote work model and move to rural areas for a more affordable lifestyle while pre-retirees are reconsidering their plans to move to larger, more crowded metropolitan areas, or care retirement communities where future outbreaks can spread more quickly. Construction costs are approximately 30-35% higher compared to other south Asian countries, possibly due to high tariffs related to imported construction material. This cost has once again risen 12% this year compared to the last year. According to the National Association of Home Builders, the average new single-family home has increased by more than USD 35,000/- within the last year.
Investing in Real estate as opposed to holding funds in banks
On the other hand, in the current low-interest-rate environment when the inflation is around 6.7%, funds held in banks provide negative returns offering only 4% per annum.Those who have invested in banks therefore receive a negative return of about 2.7% minimum per annum. Therefore, instead of holding funds in the bank, there is a tendency to invest in real estate to ensure the highest returns. This is further fuelled by the climate being conducive for real estate investment because home and land loans offer low-interest rates in the short and long run and this particular target group has expendable income that they are willing to invest in real estate instead. Although housing has risen to premium pricing, apartment prices have still managed to remain reasonable despite an increase of prices in apartments as well.
How have the country and the players in real estate and construction kept up with the ever changing needs of an uncertain economy, despite the many challenges that the embargos and restrictions have brought up? This is where long standing players such as the Blue Ocean Group have stepped up.
The Blue Ocean Group standing tall
The specialty of the Blue Ocean group is that, having foreseen these challenges, the group has set a clear strategic path, set by professionally qualified and experienced corporate planners under the leadership of its chairman Mr. Sivarajah Thumilan. As a result, the group is now geared to provide to the needs and wants of the different social groups almost intuitively and in the long run, support the government in its quest for self-sufficiency even amidst the crippling hurdles thrown by the pandemic and the global economy. It continues to play to its strengths and reshape its strategies, including investing in markets where the government is committed to long-term infrastructure programmes and choosing to exclude regions and sectors which cannot provide profitable, low risk growth. Despite these challenges, the Blue Ocean Group has continued on its policy of offering quality apartments at reasonable prices to the general public and foreign investors.
The Group is also aware of the industry being riddled with unscrupulous builders who adopt a “hit and run” approach with their projects. Lack of qualifications, competent staff, sufficient experience, finances or access to good quality building materials have led to this attitude which in turn results in higher cost and time over-runs, culminating with customer disappointment. The vision of the Blue Ocean Group is “To be the most highly respected and ethical company in the industry,” standing as a stark contrast to such builders and safeguarding the ethics in the industry, being true to their dedication to Integrity, Quality, Discipline, Flexibility, Safety and Service. The Group’s priority is executing their already strong order book which is foreseen to drive attractive cash generation and returns in years to come, providing the group a strong foundation to stand on.
The Group’s dedication to build, maintain, protect and enhance their reputation as the most ethical, efficient and trusted company among their employees, clients, customers, supply chain partners, investors and the community at large has safeguarded their position in the market as pioneers and trailblazers in the industry, while their robust approach to corporate responsibility, has ensured delivery of the highest quality within budget. Their strong and sturdy foundation built over many years of trust, dedication, loyalty and steadfastness is what helps them stand strong even at the face of the storms that an unstable economy brings.
Link Engineering – the construction giant
Link Engineering, a subsidiary of Blue Ocean Group of Companies, is a household name in Sri Lanka and is one of the first few construction companies in the country with experience spanning over four decades. Having been recognized with many awards for their construction excellence over the years, Link Engineering has undertaken a number of successful government and nongovernment projects in the past and continues to forge ahead in its trailblazing journey, keeping in line with their promise of quality, stability and integrity.
The company currently has a number of condominium projects as well as a variety of public and government projects such as hospitals and universities under its wing that have been entrusted to the group.
Looking towards a developed Sri Lanka and a thriving real estate and construction industry
But how can the industry as a whole evolve, in line with the growing economic needs of the country?
Developers in Sri Lanka, including the Blue Ocean Group are in collaboration with the Urban Development Authority to introduce new laws and reforms to increase foreign investment in the real estate sector. And with the government stepping into the equation, it is expected to bring about unprecedented advantage to the industry and the country’s economy as a whole.
Since the new regime came into power, it introduced some of the lowest corporate tax rates in Southeast Asia. Reduced bank rates, increase in resident visa duration and encouraging crypto currency are some of those measures that have seen results in encouraging foreign investment on the real estate and construction industry. In order to avoid the danger to sustained growth of the country, Sri Lanka must incentivize the private sector to increase the salaries and benefits of their employees which will ultimately improve other facets of Sri Lanka’s economy as well, including propagating the real estate and construction industry among the local investors.
To increase and maintain the flows of foreign direct investments, the government of Sri Lanka will need to make concentrated and ambitious efforts to address gaps and play to its strengths by creating a more hospitable environment for investments. Reforms in Sri Lanka’s trade policy and liberalization with the annual budgets to boost the trade can diversify the economy and exports and drive growth. Sri Lanka was ranked 111thout of 190 economies in the Ease of Doing Business index 2018 which showcases opportunity and room for improvement. It is understandable that due to the uncertainty of these times, long-term policy strategies can be a challenge but this has the potential to serve as path-setters and expressed commitment to policy continuity in support of the vision of the Government of Sri Lanka.
