Sri Lanka construction sector boom seen reviving

ECONOMYNEXT – Sri Lanka’s construction industry is expected to do well in the next few years given increasing homeownership affordability, big government infrastructure projects and rising demand for high-rises, stock brokers First Capital Equities said.

Growth in the sector slowed down in 2015 after the new government halted some big infrastructure projects, pending reviews of their costs and environmental impact.

“Infrastructure being one the main driving forces of the construction sector, suffered a hefty blow amidst slowdown in the infrastructure drive during 2015,” the brokers said in a research report on the construction sector.

But the brokers said they expect “a booming construction sector over next 2-3 years supported by rising affordability for housing, demand for skyscrapers and the government’s mega infrastructure drive.”

The report said the listed Construction & Building Material Sector on the Colombo bourse is expected to provide 46% average return (annualized 29%) over an 18-month period, well above the expected market return.

First Capital Equities said middle income affordability will be one of the drivers of construction through the housing market.

“Higher affordability coupled with the prevailing lower interest rate regime and accelerating urbanization has increased demand for housing and apartments, driving the construction sector,” they said.

Skyscraper construction will continue to dominate in the tourism and office space sector.

“With the prevailing high tourist arrival figures converting into new hotels, supplementary establishments and shopping malls, skyscraper construction is expected to continue at a similar pace to the last 5 years,” the report said.

“The shortage in office space is also likely to add to the future demand for more skyscrapers over the next 5 years.”

The report also said the new government’s USD 40 billion Western Region Megapolis project will provide a huge boost to the overall construction sector.

(COLOMBO, Sept 29, 2016)
 

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