Construction sector seeks execution of core relief proposals from Govt.

• Steering committee to ensure delivery

Ceylon Institute of Builders President Dr. Rohan Karunaratne	Ceylon Institute of Builders Vice President Ruwan De Silva

The Sri Lankan construction industry has issued a renewed call to the Government, urging immediate implementation of long-delayed relief measures as the sector faces one of the deepest downturns in its history. Industry leaders stress that these measures are urgently needed because, for a very long time, the Government has not approved the budget proposals already put forward by the industry. They warn that continued bureaucratic delays could lead to further collapse of businesses, job losses, and stalled national infrastructure projects.

Although the Government has recently launched several large-scale infrastructure projects, industry stakeholders argue that the benefits have flowed to only a handful of the biggest contractors. This concentration of work, and the ignorance of contractors’ requests to the Government has left the SME sector and smaller contractors—who form the backbone of the industry—struggling without opportunities due to banks blocking funds, stalled projects, lack of vehicles and people, etc., and in short all their resources have been blocked. Industry warns that without a fairer distribution of projects, thousands of smaller firms and their employees will be shut out of the recovery process, undermining the sector’s long-term stability and diversity.

Reviving Sri Lanka’s construction industry is not just an economic priority, it is a national imperative with transformative social impact. As a sector that contributes nearly 7–8% to GDP and sustains hundreds of thousands of jobs. As one of the country’s largest employers, the industry has the capacity to rapidly generate jobs across both skilled and unskilled segments, directly easing unemployment pressures.

A sector in crisis

After the Easter Sunday attacks, political instability, the COVID-19 pandemic, economic crisis, import bans, hyperinflation, and fuel shortages, construction activity contracted by 23% in 2023 alone, more than 500,000 jobs have been lost since 2019, and half of all registered contractors—particularly SMEs—have exited the sector. Nearly 20% of Sri Lanka’s population, which depends on construction for direct or indirect livelihoods, has been affected.

Relief measures stuck in limbo

Two Governments and two construction ministers have already endorsed 26 relief measures, but none have been fully implemented. Industry associations argue that the delays stem from excessive bureaucracy, repeated committee reviews, and misinterpretation of contract conditions.

Contractors stress that they “cannot wait indefinitely while projects collapse” and insist that what is required now is “execution—not more studies.”

Key demands for immediate action

Urgent measures essential for survival, include:

• Institutional reform: Establishing a high-powered Standing Steering Committee on Construction, with both Government and industry representation, to cut through bureaucracy and oversee implementation.
• Tax and cash flow relief: Exemption from the Social Security Contribution Levy on pre-2022 contracts, early release of retention funds against guarantees, and reimbursement of actual overheads for stalled projects.
• Fairer contracts and payments: Enforcing standard contract conditions, granting automatic extensions for COVID and crisis-related delays, and linking delayed payment interest to the Central Bank’s policy rate plus 3%.
• Inflation and forex protection: Compensating for price escalations across all contracts, revising rates for crisis-hit projects, and shielding contractors from currency fluctuations through government-backed letters of credit.
• Safeguarding industry capacity: Rejecting abnormally low bids, reintroducing clustering of contractor grades to support SMEs, and ensuring direct payments to subcontractors and suppliers to keep the supply chain afloat.

A warning

Thus, construction has the fastest potential to reignite growth and restore public confidence. Every rupee invested here generates strong multiplier effects across more than 60 allied industries—from cement and steel to transport and services—multiplying tax revenues and supporting small businesses nationwide. For the Government, incentivising construction through targeted tax breaks, concessional financing, and accelerated approvals will yield quick fiscal returns while visibly improving roads, housing, and public infrastructure. 

Just as importantly, a revived industry means affordable housing for families, better urban mobility, and a foundation attractive to foreign investors. By placing construction at the centre of the Government’s recovery agenda, the Government can deliver inclusive growth, tackle unemployment, and send a clear signal that the nation is back on the path of development.

Every moment lost risks worsening unemployment and eroding economic stability/growth; urgent action to revive construction is vital for Sri Lanka’s future survival.