Demand and Supply in Construction Industry

Construction Industry is one of the most booming industries in the whole world. This industry is mainly an urban based one which is concerned with preparation as well as construction of real estate properties. The repairing of any existing building or making certain alterations in the same also comes under Construction Industry.

Demand in Construction Industry

Demand originates from different sub-sectors such as public housing, public-sector non-housing, owner-occupied housing and private-sector industrial and commercial, rehabilitation, improvements, repair and maintenance .However, only housing, industrial and infrastructure sectors largely contribute to the construction output in Sri Lanka. It is therefore in this light that output in those sub sectors are analyzed to review the trend of construction.

· The demand of construction industry is depend on interest rates, the cost and availability of finance, and government investment decisions.

· Government policies will be the key deterministic factor in construction demand.

· The historical development of the Sri-Lankan construction industry is closely linked with the political changes that took place .

· Private and foreign capital was boosted through the provision of incentives and infrastructure support. This change led the construction sector to grow at a much faster rate of 14.3% at peak of the public sector investment, which coincided with private sector investment in commercial and industrial buildings.

· The emergence of private property development companies made a considerable impact on construction demand in this sector, particularly in urban areas where demand grew rapidly with the expansion of the urban population. As a result, condominium style apartments and pre-built luxury housing schemes were built in urban/suburban areas.

· The cost of construction, land supply and available sources of finance, project delivery systems had a direct bearing on the demand in this sector.

· With respect to the private sector industrial and commercial buildings a significant derived demand emerged with the establishment of Free Trade Zones, (an area for investment by expatriate businesses with government incentive)

· The government also offered incentives to promote private investment and this led to a considerable increase in investment in industrial, commercial and shopping complexes.

Supply in Construction Industry

· The operation and behaviour of the construction firm, price determination for construction projects, the design process and the forecasting of construction prices reflect the supply side of the construction industry.

· Sub-contracting practices, sourcing of materials; labor and plant are of vital importance to the construction output in the industry.

· There are more smaller firms in the industry and only 8% of the contractors are capable of undertaking projects worth above SLR 10 million.This is one of the major reasons for the greater share of donor-assisted projects being carried out by expatriate contractors.

· Contractors have moved away from labor-intensive construction methods to the use of capital-intensive operations such as the use of prefabrication systems, and ready mixed concrete in high-rise buildings. This trend has been prompted by the demand for private housing commercial and industrial building.

· In terms of project procurement, both the private and public sector clients widely followed the traditional procurement systems.