The Government is gradually easing the ban imposed on development projects, with approvals given for six projects proposed by the Urban Development Authority (UDA) last week, The Sunday Morning learns.

However, several mega infrastructure projects such as highways and connecting roads and bridges are yet to be approved, pending implementation of the International Monetary Fund (IMF) Extended Fund Facility (EFF) programme.

Projects for which approval has been received from the Ministry of Finance include market buildings in Gampaha, Avissawella, Panadura, and Ampara and the Boralesgamuwa multi-purpose building, according to UDA Additional Director General Mahinda Withanaarachchi.

He said the approvals that had been sought for projects worth less than Rs. 100 million were still pending.

“Large-scale projects are mostly Public-Private Partnerships (PPPs) and they were not halted. We are waiting for investments,” he explained.

UDA projects, including large-scale housing projects and office complexes, started experiencing delays from March last year.

According to the UDA, the mega-scale development projects pending investments are high-rise mixed developments, high-end boutique hotel developments, Beira Lake waterfront development projects, residential development projects, logistic facilities and business park developments, leisure, recreational and theme park developments, high-rise office complex developments, tourist hotel development projects, and northern region development projects.   

UDA projects on hold

Withanaarachchi noted that all mega development projects of the UDA had now been put on hold while only some were currently underway due to the unavailability of funds.

“Mainly, all housing projects have now been put on hold. We may get claims and contractors are always trying to make higher claims, but we are negotiating,” he stressed.

He shared that one mega development project that cost around Rs. 25 billion had been put on hold due to funding issues. “Sethsiripaya Stage III developments have been put on hold,” he said, adding that apart from the claims, the price escalations would have to be endured by the UDA when the projects were resumed. 

Meanwhile, another senior UDA official said that there were around 12 housing projects in the pipeline, including a new housing scheme for Sri Lankans living in foreign countries. “Since we have a severe dollar crisis, the buying power of locals has also been limited. Selling prices have gone up. We are selling apartments to Sri Lankans as well as foreigners. 

“There is a good demand, but there are a few issues since we just started the programme. The foreign exchange has to come via an Inward Investment Account (IIA). The banking system for this is not properly established. We hope the system will be established properly within the next two months. We have a separate dollar account but it will be converted so the Central Bank will get the dollars,” the official added. 

Other projects affected 

The ongoing severe economic crisis triggered by the extreme shortage of foreign exchange has put the country’s infrastructure development on hold, as almost all small- and large-scale development projects have hit a roadblock due to a lack of funds.

In addition to UDA projects, other affected projects mainly include highways, housing, power, agriculture, and water supply and sanitation, it is learnt. The delay in completion of some projects has resulted in millions of dollars in losses to the country due to cost overruns and price escalation.

UDA plans for Colombo 

As per the UDA’s corporate plan for 2022-2024, the UDA has launched a programme for the construction of 50,000 housing units for relocation of underserved settlements of the city of Colombo and its immediate suburbs. For that purpose, the UDA has introduced the Urban Regeneration Project to eliminate slums, shanties, and other dilapidated housing from Colombo by relocating dwellers to modern houses, with liberated lands to be utilised for commercial and mixed development.

The UDA was aiming to develop 17,500 housing units for urban regeneration purposes by 2024, 2,000 middle-income housing divisions under a Chinese grant by 2024, 5,000 housing units under the Project Management Unit of Support to the Colombo Urban Regeneration Project by 2024, 1,000 upper-income and middle-income housing units by 2023, and 17,000 affordable and middle-income housing units by 2024.

Furthermore, the Government’s hopes of securing Foreign Direct Investment (FDI) to revive the loss-making economy have now faded away, as the UDA claimed that it had not received the expected response from foreign investors even for the mixed development projects launched in the heart of Colombo.

The Sunday Morning reliably learns that the total investment value that was to have been attracted through UDA development projects was around $ 2 billion.

During that time, Selendiva Investments (Pvt) Ltd. was formed in accordance with the Cabinet approval granted on 4 March 2020, to form a State-owned property development company with the objective of transforming the State-owned hospitality portfolios to optimum performance level through appropriate restructuring. 

The Treasury holds the full ownership of the company and State-owned Canwill Holdings (Pvt) Ltd., Hotel Developers (Lanka) PLC, and Hotels Colombo Ltd. have been vested with Selendiva Investments Ltd. at present.

Highway projects worst affected

 Of the mega development projects hit by the crisis, highways are the worst affected as almost all projects have now come to a standstill without funds or investments.  

As learnt by The Sunday Morning, except sections I and III of the Central Expressway, all other projects have currently been suspended due to lack of funds.

The project commenced its first phase on 3 May 2021 with the Kahathuduwa to Ingiriya section with a length of 24.3 km, and was expected to be completed within two-and-a-half years. However, the construction work of 2 km of the Kahathuduwa Interchange and the 47.6 km road length from Ingiriya to Pelmadulla section are yet to commence.

Although the activities of the project commenced in 2016, only 24.3 km out of 76.40 km had been awarded for construction. The 2 km of the Kahathuduwa Interchange and the 47.6 km road length from Ingiriya to Pelmadulla could not be commenced even as at 31 December 2021, after a lapse of six years from the commencement of the project.

Further, the Environmental Impact Assessment (EIA) Report for Phase II (47.6 km from Ingiriya to Pelmadulla) had not been approved by the Central Environmental Authority (CEA) even as at 30 December 2021.

The status of the Central Expressway Project (CEP) is similar to other projects that have been delayed for years for various reasons, including issues pertaining to the selection of the investors.

Section I of the CEP is currently on hold and is funded by China. Section II is already completed and Section III was commenced with local finances.

However, when contacted by The Sunday Morning, Finance Ministry Project Monitoring Department Director General P.K.A.D. De Silva said the higher authorities were yet to inform them of the future plans and that the department would soon discuss the matter with the authorities in order to resume the construction of major development projects.

As of now, there are 261 mega projects, of which some have been suspended while the construction of other projects are ongoing at a very slow pace.

“We will soon discuss the matter,” she said.