[caption id="attachment_72051" align="alignleft" width="300"]
CDASL Chairman Suresh Rajendra[/caption]
The Board of Investment (BOI) is likely to grant the construction industry an exemption from the Government’s new import restrictions as well as extensions on BOI project periods, to support them weather the current crisis.
CDASL Chairman Suresh Rajendra[/caption]
The Board of Investment (BOI) is likely to grant the construction industry an exemption from the Government’s new import restrictions as well as extensions on BOI project periods, to support them weather the current crisis.
If granted, project-related inputs will be exempted from the Government’s recent import restrictions which were imposed to prevent a foreign exchange crisis, and the project period permitted under BOI agreement for projects that are currently underway but impacted by the shutdown will be extended.
A letter with these requests specified was sent to the BOI by the Condominium Developers Association of Sri Lanka (CDASL), the representative body of condominium developers in the country.
CDASL Chairman Suresh Rajendra, who is also the Head of Property at John Keells Holdings, told The Sunday Morning Business that the letter they sent received a positive response from the BOI and they are optimistic of receiving approval.
“(The) BOI Director General responded almost immediately saying that they are looking at it. If contractors are prevented from importing stuff which they need for projects, they will pass the delay damages onto the developer. So I’m hopeful that there will be some good news on these requests. We have not yet received a formal response, but responses so far have been reasonably positive,” Rajendra added.
According to the letter, construction sites have been shut down due to the ongoing restrictions and global supply chains for materials and equipment have been severely impacted.
“Given these circumstances, delays in construction projects are unavoidable, and ensuring BOI concessions are extended to accommodate such unavoidable delays would be critical to ensuring the viability of many of these projects,” the letter stated.
On 2 April this year, the Cabinet of Ministers decided to suspend or limit importation of non-essential items. To contain the widening trade deficit and impacts it would have on foreign exchange reserves of the country, import restrictions were further expanded to all import goods with exceptions given only for fuel, pharmaceuticals, and raw materials for export-related manufacturing.
Construction raw materials were not given any exception.
According to the Central Bank of Sri Lanka External Sector Performance report for December 2019, Sri Lanka’s building material imports for last year amounted $ 1.5 billion, similar to the previous year, while base metal imports were $ 562 million.
According to research done by Kotelawala Defence University (KDU), amongst the raw material consumed by Sri Lanka’s construction industry, the highest volume – 33% – is being used for office buildings and 11% for market complexes.
Meanwhile, the CDASL sent a letter to President Gotabaya Rajapaksa on 17 April requesting relief for the property development and construction industry.
Elaborating on the economic shock caused to the construction industry by Covid-19, the CDASL in the letter proposed eight measures to help them get back on their feet; permitting the importation of raw materials and the extension of the BOI project period were among them. The CDASL has also requested clarification on restricted import items in order to avoid further disruption in project supply chains.
Furthermore, the CDASL requested to waive off levies such as the Port and Airport Development Levy (PAL) and cess on project-related material for a stipulated time period to stimulate development activities and reduce costs.
Moreover, their foremost request in the letter was to permit and facilitate the commencement of construction projects as soon as practically possible. The CDASL assured that “a resumption of work could be done based on clear regulations and restrictions as advised by the Government’s health authorities”.
The second request was to include property developers among the list of industries or sectors eligible for financial concessions recently announced by the Central Bank to help with working capital or cash flow pressures. It is notable that following the Easter Sunday attacks last year, the construction industry, which is suffering since late 2018, requested the Ministry of Finance to provide them a moratorium similar to that of the tourism sector. However, the request was shot down by then Minister of Finance Mangala Samaraweera.
The CDASL also requests the President to encourage new investments greater than a stipulated value by granting attractive concessions.
In addition to these measures, the CDASL also requests to fast track the implementation of real estate investment trusts (REITs) and related legislations, and to encourage foreign investment in Sri Lankan real estate. REITs are corporations that own and manage a portfolio of real estate properties and mortgages.
Rajendra is optimistic that the 30-member Presidential Task Force appointed on Wednesday (22) would look into their concerns and grant their requests. The Task Force headed by Basil Rajapaksa was appointed by President Gotabaya Rajapaksa and aims to revive the economy that has been severely hit by the Covid-19 pandemic.
Sri Lanka’s Gross Domestic Product (GDP) was Rs. 14,449 billion in 2018, of which the construction sector’s contribution was approximately Rs. 1,083 billion. The total debt from the construction sector to private and state banks stands at 20% of their contribution to GDP, which is over Rs. 216 billion..