By: Staff Writer
July 16, Colombo (LNW): Sri Lanka’s construction industry is emerging as one of the strongest indicators that the country’s economic recovery is shifting into a more sustainable investment-led phase, with record bank lending, rising foreign investment and increased imports of building materials pointing to renewed confidence after years of economic turmoil.
Fresh industry data shows credit extended to the construction sector climbed 18.8 percent in 2025 to an all-time high of Rs. 1.81 trillion. At the same time, foreign direct investment (FDI) into housing, hotels and commercial buildings increased 55 percent to US$173 million, while imports of construction materials rose 9.7 percent to exceed US$1 billion for the first time since the crisis.
The figures suggest that businesses are once again committing capital to long-term projects after postponing investments during Sri Lanka’s financial collapse in 2022. Economists have consistently argued that sustained economic growth cannot rely solely on consumption and tourism but must be supported by productive private investment.
According to an industry review published in Tokyo Cement’s latest annual report, declining interest rates, improved business confidence and easier access to finance enabled developers and contractors to revive projects that had remained dormant during the crisis years.
Construction output expanded 9.2 percent during 2025, making it among the fastest-growing sectors in the economy. Cement consumption increased 16 percent to 5.29 million metric tonnes, while locally manufactured cement sales jumped 25.7 percent, indicating stronger domestic demand as projects resumed.
The recovery has been supported by several high-profile developments, including the restart of the Kadawatha-Mirigama section of the Central Expressway, progress on the Colombo Port Expansion Project, government-backed housing programmes and growing investment linked to Colombo Port City.
The revival extends beyond construction sites. Imports of machinery and equipment increased 22 percent, suggesting companies are investing in productive capacity rather than merely replenishing inventories. Construction Purchasing Managers’ Index (PMI) readings remained in expansionary territory throughout 2025, averaging 59.1, further reinforcing evidence of sustained sectoral growth.
Industry leaders, however, caution against excessive optimism. Tokyo Cement Chairman Dr. Harsha Cabral said disciplined economic policies have laid the foundation for recovery, but warned that geopolitical tensions and a fragile global economy continue to pose risks.
While FDI into real estate is projected to rise further to around US$210 million in 2026, the sector has yet to return to its pre-crisis strength. Cement consumption remains below historical highs, large-scale infrastructure projects are still relatively limited and industry capacity utilisation continues to lag pre-crisis levels.
These indicators suggest that although the recovery is gaining momentum, Sri Lanka’s construction boom remains a work in progress whose long-term success will depend on maintaining investor confidence, policy stability and continued economic reforms.