Construction companies take hit amidst rising costs

  • Projects delayed by months
  • Complains over cement shortage and price hikes of electric cables, steel

BY Dinitha Rathnayake

Increasing prices of raw materials coupled with the shortage of cement in the market have exacerbated the issues faced by small and medium-scale construction companies, The Morning Business learns.

Speaking to us, several small and medium-scale construction companies revealed that the rising material cost for them has become a huge issue.

“After so many years, we face such a problem. Our projects are delayed for months due to the shortage of cement and the (rising) material cost,” said Ranthisi Homes Proprietor Ravindra Wickramasinghe.

According to him, the profit margin has also decreased due to these issues.

”We always had to discuss with clients about the increase in the material cost, as we are unable to proceed with the same initial original agreement we had with our clients. Both parties had to bear the loss by 50% since the company is unable to bear the cost individually,” he said.

Wickramasinghe also claimed that therefore, it is almost impossible to continue constructions at a time like this.

Meanwhile, speaking to The Morning Business, SND Engineering and Constructions Director Samantha Dissanayake said that the steep increase in the prices of raw materials has shot up the construction cost, where the prices of cement, electric cables, steel, and polyvinyl chloride (PVC) pipes have gone up immensely.

“We bought a tonne of steel for Rs. 13 million eight months back, but now the same cost us around Rs. 23 million. Large-scale construction companies don’t have the cement issue since they bought them in bulk. But our constructions are delayed for months due to this shortage,” he said.

Dissanayake further said that some constructions were delayed for periods of up to three to four months and that certain clients have taken legal action against the company due to this delay.

“This delay was not on our part. Some clients understand this situation and some don’t. The whole system has turned upside down,” he stressed.

Another common issue these construction companies face is that of labour. According to stakeholders of these construction companies, lacking skilled labour in construction sites has also become a problem.

Besides the increase in the cost of raw materials, it is learnt that the constant increase in fuel prices was the main reason for the increase in the cost of construction materials, where suppliers and transporters have passed on the additional fuel cost onto construction materials.

Sri Lanka suffers from high construction costs, which makes housing unaffordable. A study on domestic migrant workers by Caritas Sri Lanka in 2013 showed that 61% had given the need to build a house as one of the reasons to migrate.

Meanwhile, cement companies in Sri Lanka have decided to increase the price of a 50 kg sack of cement by Rs. 177. The new price of such a pack of cement is Rs. 1,275.

Recently, the Government lifted the control price imposed on cement, and following talks on 2 November, importers assured the Ministry of Finance that the shortage will be rectified within a month.