Construction costs continue to stabilise: CIOB

CIOB Adviser Prof. Chitra Weddikkara

CIOB President Dr. Rohan Karunaratne

VFORM Consultants Director Ch. Qs. Lalith Ratnayake

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Sri Lanka’s construction sector has entered a period of cost stabilisation, with Colombo maintaining one of the most competitive construction cost positions in the Asian region, according to the latest Ceylon Institute of Builders (CIOB) Sri Lanka Construction Cost Report 2025 – Colombo, prepared by VFORM Consultants Ltd. The annual report provides updated benchmarks across six major building categories and confirms that Colombo ranks among the lowest-cost construction markets in Asia, despite moderate increases in labour-driven costs during 2025.

The report compares construction costs per square metre in Colombo against key Asian cities including Singapore, Hong Kong, Seoul, Shanghai, Beijing, Kuala Lumpur, Jakarta, and Bangalore.

Findings show that in 2025: Colombo recorded the lowest construction cost position in five of the six building categories analysed, Colombo held the second-lowest position for industrial warehouses. This positioning is reflected across: High-rise apartments, Prestige office towers, 3-star hotels, 5-star resort hotels, large shopping complexes, and industrial warehouses.

The report’s overall cost comparison places Colombo as the second-lowest cost city in Asia in aggregate construction cost per m².

A key contributor to cost stabilisation has been the reduction in several major material inputs.

According to Construction Industry Development Authority (CIDA) statistics cited in the report, average prices in 2025 compared with 2024 changed as follows: Reinforcement steel: –21%, Fuel: –10%, Concrete: –1%, Cement: +3%.

The report notes that the decline in concrete prices was largely linked to lower fuel costs, while cement increases followed higher global production input prices.

The Sri Lankan rupee remained relatively stable over the review period, with the USD exchange rate fluctuating within a margin of approximately 1%, reducing volatility in imported material pricing.

The report also highlights that construction cost increases appear significantly larger when measured in local currency terms, due primarily to exchange rate depreciation since 2020.

From 2020 to 2025: Construction costs increased 13% in USD terms, Construction costs increased 81% in LKR terms.

While material costs declined, overall construction costs rose moderately in 2025 compared with 2024, driven mainly by labour-related factors.

The report identifies: Statutory wage adjustments and skilled labour migration overseas. CIDA indices indicate skilled labour wages increased by approximately 5% in 2025.

Construction sector growth strengthens market confidence

The report notes that Sri Lanka’s construction sector recorded measurable economic recovery in 2025. Key indicators include: 12.2% growth in construction activity in the third quarter of 2025, Gross Value Addition of Rs. 499.9 billion, and expansion in construction-related sub sectors including mining and material supply.

The CIOB President Dr. Rohan Karunaratne emphasised that the Construction Cost Report serves as a critical annual reference for: Government infrastructure planning, Board of Investment (BOI) project appraisal, foreign direct investment structuring, multilateral development feasibility analysis, private sector and individual housebuilding decisions.

Despite cost pressures from labour and financing conditions, the report concludes that Colombo continues to sustain its relative cost advantage within Asia. The report reinforces the importance of transparent, up-to-date cost data for investment decision-making and long-term industry planning. Further benchmarks are available through CIOB’s digital platform buildmarket.lk.

The Ceylon Institute of Builders (CIOB)’s initiative to have a digital platform (buildmarket.lk) will help to have more reliable data and information with industry partners. However, it may be necessary to induce joint ventures of local firms; local and international firms; and public and private partnerships in going forward and to resolve; capacity issues, capital infusion and to introduce new technologies.

Overall, the findings suggest that Sri Lanka’s construction industry has entered a phase of post crisis realignment characterised by rising absolute construction costs but sustained regional competitiveness. Colombo’s continued positioning among the lowest cost construction cities in Asia underscores the sector’s capacity to absorb fiscal, labour, and energy related shocks without losing its relative market attractiveness.