Sri Lanka’s construction sector appears to have entered a phase of cost stabilisation, with Colombo retaining one of the most competitive construction cost positions in Asia, according to the latest industry benchmarks.
The 2025 Construction Cost Report – Colombo, issued by the Ceylon Institute of Builders (CIOB) and prepared by VFORM Consultants Ltd., shows that Colombo ranks among the lowest-cost construction markets across the region. The study compares average construction costs per square metre with major Asian cities including Singapore, Hong Kong, Seoul, Shanghai, Beijing, Kuala Lumpur, Jakarta and Bangalore.
Findings indicate that Colombo recorded the lowest construction cost position in five of the six building categories assessed, including high-rise apartments, prestige office towers, three-star hotels, five-star resort hotels and large shopping complexes. It ranked second-lowest in industrial warehouse construction. In aggregate cost per square metre, Colombo was the second-lowest city overall in Asia.
A significant contributor to cost stabilisation has been the easing of key material prices. Data from the Construction Industry Development Authority (CIDA), cited in the report, show that between 2024 and 2025 reinforcement steel prices fell by 21%, fuel costs declined by 10%, and concrete prices edged down by 1%, while cement rose modestly by 3%. Lower fuel costs were a key factor behind reduced concrete pricing, whereas cement increases reflected global input pressures.
Currency stability also played a role. The Sri Lankan rupee fluctuated within a narrow 1% band against the US dollar during the review period, reducing volatility in imported construction inputs. However, the report underscores the cumulative impact of exchange rate depreciation since 2020: while construction costs rose 13% in US dollar terms over five years, they increased 81% in local currency terms.
Despite material cost relief, overall construction costs in 2025 rose moderately due to labour-related pressures. Statutory wage revisions and continued migration of skilled workers abroad contributed to approximately 5% growth in skilled labour wages, according to CIDA indices.
Encouragingly, sector performance indicators point to recovery. Construction activity expanded by 12.2% in the third quarter of 2025, with Gross Value Addition reaching Rs. 499.9 billion. Growth was also observed in mining and material supply subsectors, reinforcing supply chain resilience.
CIOB President Dr. Rohan Karunaratne noted that the annual report serves as a reference for government infrastructure planning, Board of Investment project appraisals, foreign direct investment structuring and multilateral feasibility studies.
While labour and financing pressures persist, Colombo’s sustained regional cost advantage highlights the sector’s capacity to absorb post-crisis shocks. As Sri Lanka seeks to attract investment and accelerate infrastructure delivery, transparent and updated cost benchmarks remain central to informed decision-making and long-term industry planning.