Cost of construction in SL, highest in S. Asia
View(s):Unit cost of construction in Sri Lanka is the highest in the South Asian region.
Construction labour and the cost of the raw materials have been rising over the last five years, and are higher here than other parts South Asian or the South East Asian regions for that matter, experts say. “Our construction labour is about 25 to 30 per cent more expensive than in these regions – especially in India,” Christopher Joshua, Managing Director Access Engineering PLC told the Business Times.
Domestically produced inputs such as flooring, sanitary ware, aluminium and steel reinforcement have been expensive relative to peer countries due to high costs, analysts agreed. A main reason for high cost of construction is the five different taxes imposed on many imported construction materials. These are VAT, NBT, customs duty, CESS and PAL.
The cost of buildings has tripled since 1990 not only because of the rapid increase in land prices, particularly in city areas, but also because of price increases and shortages of construction material.
“As the majority of the construction materials are imported with the application of such taxes, it is obvious that our construction cost is the highest. Para-tariff structure is ranging from 70 per cent to over 100 per cent for most of the imported materials on CIF values and you would see that the magnitude of cost escalation in the import material component of a construction project impacts on the final cost of construction,” an analyst noted saying that even with the high tariff structure on construction materials, most developers decide to directly import a high proportion of materials for their projects due to better value propositions.
Builders say that generally the import material component of a typical residential project would vary from 25 per cent – 35 per cent and for other projects such as hotels, it can go up to high as 50 per cent due to extensive use of façade aluminum systems, glazing, dry wall partitions etc. Mr. Joshua added that a critical construction project labour cost is really intense but in a capital intensive project such as piling and sub structures, labour is lower. Going forward, labour is expected to remain a driving factor in increased building costs, he added. Analysts agreed noting that interest costs being in double digits have halted construction at small time projects.
(DEC)