Sri Lanka’s construction sector counters with main focuses on privately funded construction and housing projects are expected to see weaker sales momentum, due to the higher mortgage and development financing costs in the coming months, as a result of Central Bank of Sri Lanka’s rate hike, Ambeon Securities’ Impact of Policy Rate Hike on Listed Companies report released recently said.
"E.g. counters such as Prime Land (PLR.N), Tokyo Cement (TKYO.N), Royal Ceramics (RCL.N) may experience slower project expansion and weaker sales momentum as they focus on private projects," the report detailed, summarising the direct impact the rate hike is to have on Sri Lanka’s construction sector focused listed companies.
On 26 May, the CBSL raised its benchmark interest rate: the Overnight Policy Rate (OPR), by 100 basis points to 8.75%. The standing deposit facility rate and standing lending facility rate were adjusted to 8.25% and 9.25%, respectively.
“Privately funded construction and housing projects face direct pressure from higher mortgage and development financing costs. Construction and real estate demand is highly leveraged and sensitive to rising borrowing costs, leading to slower project uptake in a rate hike environment,” the report said.
Comparatively, the report noted that the counters of construction sector listed companies with higher exposure to government-related projects are stave this broader sector impact.
“Government-funded construction projects may not face an immediate negative impact. E.g counters such as Access (AEL.N), which have higher exposure to government-related projects, may experience longer-term cash flow pressure and working capital strain.”
However, it also noted that in the long run, the indirect impact through increased fiscal pressure and tighter budget allocations are to be felt within these counters in the future.
Sri Lanka’s monthly economic indicator on the construction sector, the Purchasing Managers’ Index for Construction, calculated by the Central Bank of Sri Lanka declined to 45.7 indices in April 2026, thereby indicating a sector contraction.
Though seasonal slow-down had been noted as a reason, survey respondents cited input shortages, particularly of petrochemical-based raw materials, and rising costs stemming from the conflict in the Middle East as factors that hindered execution of planned work.
Notably, though the PMI survey found that though most firms reported consistent availability of projects in April, certain respondents indicated that new projects have the potential to face delays as rising raw material costs may require price renegotiations.
Overall business sentiment among construction firms was categorised as positive over the next quarter, driven by the steady flow of projects – though concerns over geopolitical developments persist.