Construction boom likely to slow
High interest, shortage of labour, soaring material cost
are some of the reasons
By Indika Sakalasooriya
Sri Lankan real estate and construction
boom is likely to face a temporary slow down despite the construction of many
lavish condominiums in the heart of Colombo. Industry analysts pointed out that
shortage of casual labour, soaring prices of the constructional raw materials,
and country’s security situation, high interest rates and mis-identification of
the area of demand in the real estate market have all contributed to the
As they point out the construction boom that started during the year 2004 is
destined to come to a juncture by now as the Tsunami construction work has been
almost completed. Hence this slowing down in the industry is expected and quite
Murtaza Jafferjee, Managing Director of JB Securities is of the view that the
recent hike in the interest rates is the main reason that caused significant
dampening in the real estate and construction boom.
Jafferjee points out that even the richest in the country buy real estate with
bank borrowings while only the percentage of bank financing may vary. The rich
may only borrow 30 to 40 percent of the amount while the middle class person has
to borrow almost 90 percent of the amount needed to buy a piece of land, he
“Almost all the middle class income people buy land on mortgages. But with high
interest rates as 20 percent many cannot afford to do that. So this factor of
non-affordability in the short run will slow down the industry and land prices
will not appreciate at the same speed as it used to be” he said.
The country’s growing median age group is in constant search of shelter but
right now there is a lack of affordability and this gap between marginal demand
and marginal supply is causing a down turn in the industry” he further remarked.
According to industry sources around 350,000 people are in need of middle class
housing units and the demand is estimated to rise to 650,000 units over the next
few years. “If the industry is to sustain the momentum the government should
grant land to the private sector to construct affordable houses” Jafferejee
Indika Rajakaruna, Senior Research Analyst, Asha Phillip Securities predicts
that the slowing down of the real estate industry will lead to a certain price
reduction of land. “What I feel is that the Sri Lankan real estate sector is not
catering to the correct segment. The condominiums that are being built only
serve a niche market and the wider market is not addressed by them. Along with
high interest rates this factor has resulted in the diminishing of the boom” he
He is of the view that along with high cost of construction raw materials,
casual labour going out from the country to regions like Middle East also have
contributed to the slowing down of the construction and real estate industries.
Complementing this point Murtaza Jafferjee said that if the industry is to
survive, new construction modulations with state –of- the –art equipments and
machinery and less dependent on man power should be introduced as soon as
Lankan eviction time longest in Asia
By Samantha Whybrow
Property owners beware. If your tenant
does not pay rent, it will take an average of 730 days to evict them. This is at
least double the average of any country in South Asia.
Research made available by the Global Property Guide, an international research
and news group providing information on property trends around the world,
reveals that a backlog of cases in Appeals Courts means Sri Lankan landlords
could wait up to 2 years to evict a non-paying tenant.
The research group also revealed that, comparatively speaking, rental yields in
Sri Lanka are amongst the lowest in Asia.
According to the report, a Sri Lankan landlord can expect a 4.24% return on
their investment, based on a 120 sq. m. apartment located in the premier land in
Colombo. Chinese investors could expect a 7.7% return on investment, while
Indonesian investors could expect the highest returns at 13.4%.
However, yields are as high as 10% along the Western coastline, the researchers
The research group provides information mainly for foreign investors.
While potential investors are encouraged by the high yields on beachfront
properties, they are also warned against investing due to the ongoing conflict
situation, the “prohibitively high” transaction costs (110%), and high rental
Change the management but not the owners
Workers say after experiencing privatization
The need for a change in management though not
necessarily a change in ownership is the view taken by many workers who have
experienced privatization, according to a study released by the Centre for
Poverty Analysis (CEPA) on Thursday.
“Many workers related privatization to their own welfare and agreed that
privatization of the company had been beneficial,” said Nilakshi de Silva,
co-author of the report. “However, some workers, especially those with more
years of education, tend to look beyond their own experience, at issues such as
the impact on development of the country,” she continued.
Co-incidentally released on the same day as a headline from a major newspaper
announced the death of the Public Enterprises Reforms Commission (PERC), a
jam-packed audience turned out to hear this latest research report from CEPA,
analyzing the social impacts of privatization on employees in the manufacturing
The fact that such a crowd turned out is perhaps indicative of the public
interest in this issue despite the current ‘no privatisation’ policy of the
government. “We’ve never had so much interest in our forums before,” remarked de
Silva as more people tried to crowd into the tiny space.
The researchers found that while workload under privatization had increased,
workers were not necessarily unhappy about it. “Often, under government control,
the organizations were overstaffed, so workers now do more work with less
staff,” said de Silva. However, a shift to performance based incentives provided
a trade off for the increased workload it seems.
The news was not all positive and many workers were unhappy with increases in
rules and regulations that accompanied privatization. Some concerns about job
security were also expressed. The authors also found that workers fear about
Studies of the impact of privatization often focus on company profits or
productivity. However, this study focused on the perceptions and experiences of
workers through interviews and surveys. The authors stressed the importance of
their approach, noting “too often people mistake worker perspective for union
Indeed, one of the findings of the study was that, “in an environment much less
influenced by party politics, many employees have abandoned previously strong
A union official present at the release was particularly vocal throughout the
discussion period, questioning the need for this study at all given the current
political context. Malathy Knight-John, Research Fellow, Institute of Policy
Studies, had to draw some order, noting, “just because it is the stated policy
of this government of no privatization does not mean we should not discus the
issue. This is something that happened in this country.”
The study was criticized by the audience for its focus on workers from the
manufacturing industry, meaning the results could not be generalized to other
The authors acknowledged this limitation although noted they deliberately chose
to focus on an industry that employed less skilled, less affluent workers to
understand more about the impact of privatization of workers more vulnerable to
The full report, along with other research papers on poverty issues in Sri
Lanka, is available from CEPA
Over 25,000 enrollments for Arpico Privilege Loyalty
Privilege Loyalty Card launched recently by Arpico Supercentres & Superstores
has proved to be extremely popular with over 25,000 enrollments in just under 3
months. The loyalty card which enables shoppers to earn loyalty points on all
their purchases at Arpico outlets and then redeem them on the basis of each
Loyalty Point equating to the same value in Rupees, has been very well received
by shoppers, according to officials at Richard Pieris & Co. the entity behind
“The response greatly exceeded our expectations even resulting in capacity
issues in processing the applications at the pace they started coming in” said
Anil Senewiratne, Customer Relationship Manager at Richard Pieris. “The Arpico
Privilege loyalty scheme offers its members a unique shopping experience with
special gifts, discounts, prizes, surprises, exciting in-store deals, free
shopping and even customized offerings.” Senewiratne said.
Arpico also kicked off a Consumer Promotion recently, open exclusively to
members of the Privilege Loyalty Program where 3 lucky winners will receive
return air tickets to Bangkok with paid accommodation for 3 days. The draw for
the promotion, which is scheduled to run until 31st July, is to take place mid
Richard Pieris & Company entered the retailing sector five years ago and has
been successful in introducing the hypermarket concept to Sri Lanka. Within a
short period of time it has managed to become a household name for convenient
shopping as Arpico outlets are well stocked with more than 35,000 high quality
products including fast moving consumer goods, kitchenware, toys, giftware,
glassware, furniture, consumer electronics, clothing, stationery and many more.
Arpico Supercentres claim to offer the best of quality, the best in variety, and
the best in freshness, with all perishable items stored under hygienic
conditions in in-built cold rooms meeting international standards, with a wide
range of the best brands at competitive prices within a comfortable environment
and the assistance of friendly staff, all leading to unmatched convenience.
PUCSL to regulate petroleum related
By Santhush Fernando
The Public Utility Commission of Sri
Lanka (PUCSL) is to be vested with powers as the regulator of petroleum
industries by a proposed amendment to the Ceylon Petroleum Corporation Act.
Petroleum Resources and Petroleum Resources Development Minister A. H. M. Fowzie
told The Nation Economist that it has been decided to appoint the PUCSL as the
regulator of petroleum related industries.
With these changes the PUCSL which was established in 2002 will become a
multi-sector regulator to regulate certain physical infrastructure industries in
It came into operation in mid 2003 with the appointment of the first set of
Commissioners and its Director General. Initially the PUCSL Act provided for
regulation of the Electricity and Water Service industries. Although in March
2006 Petroleum was also added to the list of industries to be regulated by the
PUCSL, no legal provisions had been laid.
Although the liberalization of petroleum industry started off in 1994 with the
sale of CPC’s profit making Lanka Lubricants (Pvt) Ltd to Caltex, no regulator
was in place. This, many analysts say led to the unchecked arbitrary price hikes
of many petroleum related products including fuel, gas and even lubricants.
Under the proposed changes the PUCSL will be vested with wide-ranging powers not
only in relation to pricing of fuel, liquid petroleum gas (LPG) and lubricants,
but also with powers to regulate oil exploration, refining and bunkering (marine
services) activities conducted in Sri Lanka.
Earlier the PUCSL advised and assisted the Ministry of Petroleum and Petroleum
Resources Development in formulating fresh agreements with existing lubricant
market participants, culminating with the execution of agreements with Chevron
Ceylon Limited (Caltex Lanka), Lanka Indian Oil Corporation Limited (Servo),
Ashland Inc. (Valvoline), Shell Trading Middle East Pvt Limited (Shell) and BP
France S.A. (BP/Castrol) in January 2007.
The Commission consists of five members who are appointed by the minister in
charge of Policy Development with the concurrence of the Constitutional Council.
The composition of the Commission should be such that it consists of at least
one member each from the professions of engineering, law and business
management. The members have a five year term.
At present Mr. K. A. S. Gunasekera is the Chairman of PUCSL while Prof.
Priyantha Wijetunga is the Director General of the Commission.
The new Act will also contain provisions to vest the state-owned oil giant-CPC
with a wide ranging mandate including powers to commence oil exploration
activities and to recommence lubricants and bunkering services which were
privatized in 1994 and 2002 respectively. (See related story on CPC)