Parate execution will sound death knell to many construction companies

Tuesday, 5 August 2025 00:03 - - {{hitsCtrl.values.hits}}

Chamber of Construction Industry of Sri Lanka Presently the banks are moving at an unprecedented pace to auction the properties mortgaged by construction companies as collaterals to raise funds for working capital, to buy equipment, to obtain required bonds and guarantees and also to meet expenditure when construction activities were in limbo. Especially when the payments for work done is delayed generally these are funded through bank borrowings.

The construction sector was the worst affected sector during the four years from 2020-2023. The growth statistics published by the Department of Census and Statistics quoted below is ample testimony to this.

On top of above, suspension of government capital development projects in February 2023 and over Rs. 200 billion outstanding payments for work done at the time of suspension was a major blow that threatened the very existence of these companies. Even though the Government paid most of the above outstanding payments for work done by 2024, the claims for extended overheads during suspension and interest on delayed payments are yet to be settled to the companies. These payments could add up to another Rs. 100 to 150 billion.

Due to the economic debacle during the four years, the Government was able get relief on foreign debt payments by restructuring. Now these repayments will commence only in 2028. On domestic debt the Government got relief by reducing interest payment on EPF and ETF, which are the workers’ savings.

During the above period of recession when most of the companies in other economic sectors were struggling, all the banks and financial institutions declared robust profits. In most developing economies it is the tech companies and industries that show the best financial results and not the banks. But in our country it is the other way around!

In the Government Gazette of 4 July 2025, a notice for auction sale is published under parate execution by a private bank to auction two lands with all buildings, machinery, etc. in extent 31A 3 R I P and 3 R12.48 P respectively mortgaged by a leading construction company as a collateral for the loans and bank facilities taken. This company has the highest registration category of CS2 with the CIDA. This parate action is to recover a loan of Rs. 617,267,926 and interest of Rs. 443,849,142.

Reportedly the land and construction machinery is worth about Rs. 6.0 billion. With this auction it is very unlikely that this major construction company will be able to survive. Very soon we will find the same fate falling on other construction companies as the construction industry is yet to recover from the contractions suffered during the period 2020-2023. The need of the hour is for the Government to intervene to save the construction companies from the clutches of parate execution and give a breathing space for the companies to recover.

The writer is the CEO of the Chamber of Construction Industry

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event including Valentine ’s Day. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Flower Bouquets, Clothing, Watches, Lingerie, Gift Sets and Jewellery. Also if you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.

Parate execution will sound death knell to many construction companies

Recent columns

COMMENTS