Tuesday Nov 11, 2025
Tuesday Nov 11, 2025
Tuesday, 11 November 2025 03:40 - - {{hitsCtrl.values.hits}}
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| Ceylon Institute of Builders President Dr. Rohan Karunaratne |
The 2026 National Budget signals a cautious revival of Sri Lanka’s construction and infrastructure sector, but industry leadership warns that contractors must adapt to a rapidly changing economic environment.
In a statement issued yesterday, the President of the Ceylon Institute of Builders (CIOB) welcomed the Government’s renewed commitment to expressway development, irrigation rehabilitation and housing programs. However, he emphasised that private sector construction activity is now larger and growing faster than Government-funded projects, marking a significant shift in how construction work will be sourced in the coming years.
“We are entering a new era. The State is still a key client, but it is no longer the primary driver of construction demand,” he said.
Public sector projects continue, but at a controlled scale
The Budget allocates Rs. 342 billion for road development, including the resumption of sections of the Central Expressway. In addition, significant funds have been directed toward irrigation and drinking water projects, including Rs. 91.7 billion for reservoir and canal rehabilitation and Rs. 85.7 billion for expanded community water supply systems.
Urban regeneration and housing development programs also continue, with funds directed to public housing in Colombo and estate housing in the Central and Uva Provinces. These measures indicate steady but targeted public investment, with emphasis on essential infrastructure and regional connectivity.
Private sector construction to dominate 2026 output
Industry analysis indicates that while Government-funded construction will contribute approximately Rs. 550–650 billion in 2026, private sector development activities — including commercial buildings, industrial parks, logistics facilities, hotels, and urban housing — are expected to contribute significantly more, driven by the revival of tourism, export manufacturing zones, and mixed-use urban development projects.
A caution to contractors: “Be Careful, Be Strategic”
The Institute warns that the industry cannot rely solely on Government contracts, as was common during pre-crisis years.
“Contractors must be very careful. The market has shifted. Firms that depend only on state-funded projects risk financial instability. The growth is now in private investment, PPPs, and development zones,” the CIOB President cautioned.
He stressed the need for:
Construction sector expected to contribute 7% to GDP in 2026
Based on projected activity, the construction industry is expected to contribute around 7% of Sri Lanka’s GDP next year, with potential to rise by 2027 if private sector confidence strengthens.
Looking ahead
The CIOB emphasised that the industry is in a transition phase: Government remains an important development partner, but the future of the construction sector depends on how effectively firms can integrate with private capital, foreign partners, and long-term urban development plans.
“Sri Lanka is building again. But we must build more intelligently than before — with discipline, transparency, and strategic foresight,” the President concluded.
