• Viability of Govt. land proposal questioned
• High financing costs, market conditions impede local participation
• Calls for enhanced financial environment 

The Chamber of Construction Industry (CCI) of Sri Lanka has expressed uncertainty regarding the viability of the proposal made in the 2024 Budget in relation to the construction industry, based on past experiences.

Delivering his 2024 Budget speech on Monday (13), President Ranil Wickremesinghe as the Minister of Finance announced that the Government would provide free lands where construction companies could construct buildings for Government agencies, which would pay a monthly rent to the company until the construction cost was recovered.

This proposal had been made as the construction industry remained one of the worst affected industries by the Covid-19 pandemic, economic crisis, and import restrictions, the President said. 

Speaking to The Sunday Morning Business, CCI Chief Executive Officer/Secretary General Eng. Nissanka N. Wijeratne expressed uncertainty regarding the viability of this proposal, observing that such proposals simply looked good on paper and could not be implemented in Sri Lanka. 

He pointed out that this concept had previously been attempted in the construction of Isurupaya during Sirimavo Bandaranaike’s presidency, but had subsequently been abandoned at the time due to the high financing costs involved, with the Government deciding to fund the project by itself.  

He further noted that when this concept was initially introduced in the early 2000s, the construction industry had no issues in obtaining financing from the banking sector, while no bank was willing to lend to the industry at present. 

Accordingly, he opined that this experiment would not be viable under current market conditions and that only foreign construction companies would be able to participate.

“I don’t think this is going to help the domestic construction industry, unless someone has fraudulently collected money to invest. Only foreign companies will participate,” he stated.

Wijeratne lamented that the Government had not considered any of the proposals made by the CCI, which had included a proposal to introduce a housing loan scheme for first-time home builders at a concessionary interest rate of around 5% with a payback period of 40 years.

Speaking to The Sunday Morning Business, CCI President Arc. Jayantha Perera, while appreciating the proposals made in the 2024 Budget to support the construction industry, pointed out that the persiting high financing rates and the high cost of construction were preventing the recovery of the industry and the inflow of any foreign investment.

“The best thing for the industry is to encourage funding. But to do so, the environment must be improved. Conditions like independence of the Judiciary and security for people must be enhanced, so that people can say: ‘We will go to Sri Lanka and put in our money. We have faith.’ With the current price of the dollar, the conditions are very good for foreigners to come and invest, so the best way to improve the industry is to get foreign investment. For this, we must create an attractive financial environment,” he stated.

President Wickremesinghe made the following proposal during the 2024 Budget speech: “Government agencies will provide free lands. We will allow construction companies to construct buildings on those lands according to the plans of the respective Government agencies. After construction, these institutions will pay monthly rent to the construction company. Upon recovering the construction cost and receiving corresponding dividends, the full ownership of the building will be handed over to the Government agency. The construction of the new building complex of the Ministry of Foreign Affairs will be implemented as the first pilot project.”

Wickremesinghe further stated that another programme would be implemented, aimed at uplifting the living conditions of people living in urban estate housing in Colombo, under which the construction industry would be allowed to build large houses and shopping malls in urban estates within Colombo City. 

The lands will be provided to the construction company for free, provided that the company provides new housing to the family residing in the particular estate.

“If these families ask for houses in that housing complex, they should be given a house in these urban estates. If these families ask for houses in another place, the construction company should fulfil that request,” the President stated.