Building through the Challenges: Why Construction Matters to Sri Lanka’s Economic Future

Building through the Challenges: Why Construction Matters to Sri Lanka’s Economic Future

S.Thumilan
– Group Chairman/CEO, Blue Ocean Group of Companies

FCA, FCCA, FCPA (AUS), ACMA (UK), CGMA, FCIM, FMAAT (SL), ACS

 

Sri Lanka’s construction and property development industry has travelled through one of the most challenging periods in its history. Developers, contractors, engineers, suppliers and financial institutions have had to navigate economic instability, escalating construction costs, high financing expenses, exchange-rate fluctuations, taxation changes, shortages of skilled labor and disruptions to material supplies.

For an industry in which projects are conceived, financed and delivered over several years, these challenges are more than temporary inconveniences. They can fundamentally alter the economics of developments that were planned and priced under very different market conditions.

Nevertheless, I remain confident about the long-term future of Sri Lanka’s construction sector.

Construction should not be viewed merely as an industry that builds apartments, offices or infrastructure. It is an economic ecosystem that creates employment, supports numerous industries, attracts investment and produces long-term national assets.

The challenge before us now is to transform the resilience demonstrated by the industry into sustainable growth.

Time Has Become a Cost

Property development requires substantial investment long before revenue is fully realized. Land must be acquired, designs prepared, approvals obtained, financing arranged, contractors mobilized and construction completed before the final value of a project can be realized.

During this period, economic conditions can change considerably.

A project planned when interest rates, exchange rates, material prices and taxation were at one level may ultimately have to be completed under entirely different conditions.

Once commitments have been made to customers, however, responsible developers must continue working towards completion.

This is why time has become one of the most expensive components of construction.

Every unnecessary month lost through approval delays, financing difficulties, procurement challenges or inefficient project management adds to the cost of development. Interest continues to accumulate, site overheads remain, contractors stay mobilized and customers have to wait longer.

Improving the speed of project delivery is therefore not simply a matter of convenience. It has a direct impact on affordability, investment and customer confidence.

Keeping Affordability at the Centre

The industry’s next major challenge is maintaining affordability.

When the prices of cement, steel, aluminum, lifts, air-conditioning systems, electrical equipment, sanitary ware and labor increase, the obvious response may appear to be raising selling prices.

However, developers cannot indefinitely transfer every increase in cost to customers.

Household incomes and purchasing power do not automatically rise whenever construction costs increase. The sustainable solution must therefore come from improving productivity and efficiency.

Better architectural planning, value engineering, stronger procurement practices, reduced material wastage, modern construction methods and improved project management can collectively reduce unnecessary development costs.

Technology will also play an increasingly important role. Building Information Modeling, digital project monitoring, AI-assisted planning, modern formwork systems and other construction technologies can improve productivity, reduce waste and shorten development timelines.

The objective must be to maintain the right balance between quality, affordability, commercial viability and long-term value.

Financing and Development Must Work Together

Construction is highly capital-intensive, making the banking sector an essential participant in the development process.

Banks understandably have a responsibility to protect depositors and manage credit risk. Developers, meanwhile, have an equally important obligation to demonstrate financial discipline, transparency and the ability to complete projects.

Large property developments can extend over several years. Financing structures should therefore recognize realistic construction programs, project cash flows and prevailing economic conditions.

Excessive financing costs ultimately become part of the cost of development. When projects are delayed, these costs can compound further.

Closer cooperation between financially responsible developers and financial institutions can create better outcomes for both the industry and customers.

Developers must reciprocate by strengthening collections, controlling expenditure, managing cash flow carefully and prioritizing the completion of projects already undertaken.

Faster Approvals without Lowering Standards

Regulatory efficiency is another area where Sri Lanka can make significant progress.

Planning controls, environmental requirements, fire and safety standards, traffic considerations and infrastructure coordination are essential for responsible development.

The issue is not whether Sri Lanka needs regulation. It unquestionably does.

The question is whether those regulations can be administered more efficiently, transparently and predictably.

When approvals take unnecessarily long periods, capital remains idle while financing and other development costs continue to accumulate.

Sri Lanka should progressively move towards an integrated digital approval framework with transparent requirements, clearly defined responsibilities and measurable processing timelines.

Faster approvals should never mean weaker standards. Sri Lanka needs strong standards delivered efficiently.

This is particularly important when competing internationally for investment. Investors can accommodate demanding regulations when requirements are clear and consistently applied. What discourages investment is uncertainty.

Protecting Our Human Capital

Sri Lanka has produced highly capable engineers, architects, quantity surveyors, project managers, technical officers and skilled construction workers.

However, migration has created shortages across several professional and technical categories.

The response must be greater investment in people.

Construction companies need to provide opportunities for younger professionals, apprentices and trainees to gain practical experience while ensuring that the knowledge and expertise of senior professionals are transferred to the next generation.

Technology should support rather than undermine this process. Its greatest value is not simply replacing manpower, but enabling people to become significantly more productive.

Sri Lanka’s skilled human capital remains one of our strongest competitive advantages, and protecting and developing this resource must be a national priority.

Construction’s Wider Economic Contribution

The economic impact of construction extends far beyond the boundaries of a building site.

A major development generates work for architects, engineers, quantity surveyors, banks, insurance companies, lawyers, accountants, material manufacturers, transport operators, equipment suppliers and numerous subcontractors.

Thousands of skilled and unskilled workers depend directly or indirectly on construction activity.

Even after a building is completed, economic activity continues through facility management, security, maintenance, utilities and other services.

Construction therefore has a powerful multiplier effect.

When construction slows significantly, the consequences spread throughout the economy. When responsible construction expands, the benefits similarly extend across businesses, households and communities.

For this reason, a healthy construction sector should form an important part of Sri Lanka’s broader economic growth strategy.

Unlocking the Diaspora Opportunity

Sri Lanka also has considerable potential to attract greater property investment from Sri Lankans living overseas.

Our diaspora across the United Kingdom, Europe, Australia, Canada, the Middle East, the United States and elsewhere maintains strong personal and economic connections with the country.

Many wish to own a home in Sri Lanka, provide accommodation for family members or maintain a long-term investment here.

This represents an important opportunity to attract foreign-currency investment into the country.

However, overseas buyers expect international standards. They require transparency, professional communication, construction quality, dependable completion schedules and confidence in the legal and regulatory environment.

The more we strengthen these areas, the more competitive Sri Lanka can become as an international property investment destination.

Developers Must Accept Responsibility Too

It would be incorrect to discuss the industry’s challenges while placing responsibility entirely on the government, banks or economic circumstances.

The private sector must also raise its standards.

Developers must strengthen corporate governance, financial discipline, transparency, and construction quality and customer communication.

Most importantly, the industry must recognize a fundamental principle:

Launching a project is not the real achievement. Completing it successfully and handing it over to customers is the true measure of a developer.

Customer confidence is one of the industry’s most valuable assets. It can take years to establish and very little time to damage.

Developers must therefore honor their commitments, communicate transparently, manage capital responsibly and prioritize the completion of projects already undertaken.

Building a Stronger Sri Lanka

Sri Lanka’s construction industry has demonstrated remarkable resilience through an exceptionally difficult economic period.

The responsibility now is to convert that resilience into sustainable growth.

Government, regulators, banks, developers, contractors and professional institutions all have a role to play.

We need stable policies, efficient approvals, sustainable financing, stronger corporate governance, greater adoption of technology and continued investment in skilled human capital.

Above all, we need confidence.

Sri Lanka needs housing. It needs infrastructure. It needs modern commercial development. It needs foreign investment and productive employment opportunities for its young people.

A strong and responsible construction industry contributes to all of these objectives.

The challenges remain significant, but the opportunity is greater.

As business leaders, our responsibility is not merely to identify difficulties or wait for economic conditions to improve. It is to find solutions, improve efficiency, protect customer and investor confidence, complete what we have started and continue investing in the country’s future.

With disciplined private-sector leadership and a stable, investment-friendly policy environment, Sri Lanka’s construction and property sector can move beyond recovery and become a powerful contributor to investment, employment and sustainable economic growth.

The question is no longer simply how we overcome the challenges facing construction.

The greater question is how we use this period to build a stronger industry—and, through that industry, help build a stronger Sri Lanka.

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