COLOMBO: The cost of construction in Sri Lanka is set to rise with the increase in the country’s value added tax (VAT), say industry experts.
With the VAT increased to 18% and being applied to items that were exempted earlier, construction costs in country have nowhere to go but up, Nissanka N. Wijeratne, secretary-general of the Chamber of Construction Industry of Sri Lanka told The Island Financial Review last Friday.
“Already unit construction cost in Sri Lanka is second only to Singapore in the region and the increase in fuel prices by 10% will have a cascading effect”, he said.
“The construction industry has suffered contractions repeatedly since June 2020 with the figure in 2020 alone being 13.2%. From June 2020 till today, the total construction volume is about 50% of what it used to be.
“This is amply validated by the more than 50% reduction in demand for major building materials such as cement, reinforcing steel, ceramic tiles, roofing sheets and others.
“The situation stemmed from the delays in payments for work done by construction companies, not reimbursing the cost increases, suspension of projects in February 2023, and current action by banks to recover mortgaged assets will force even the remaining companies in the sector to liquidate. “The Chamber of Construction Industry has advocated to suspend action by banks at least until the end of 2024, when the construction industry is expected to show a reasonable growth,” he added. — The Island/ANN
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