Domestic tile market to grow at 10.7% CAGR
View(s):Less than 15 per cent of Sri Lankan houses were tiled as of 2013, which means there’s still a large market for the tile players, according to a large tile manufacturer.
“There’re two types of demand for tiles – from the government sector and the private sector. The demand by the state and private sectors is happening but not so much from private residents,” Royal Ceramics PLC (RCL) Managing Director Aravinda Perera noted at an Asia Securities’ ‘Wealth Insights’ series of investor forums held early this month.
The domestic tile market is to grow at 10.7 per cent Compound annual growth rate (CAGR) according to a presentation at this forum titled ‘A Pause in Growth, but what’s beyond 2018?’ by Asia Securities’ Construction Sector Analyst Naveed Majeed focused on the outlook for the construction sector. Asia Securities’ outlook of the construction industry said cement accounts for 20 per cent of the construction costs and that housing approvals slowed during last year owing to rate hikes.
The residential housing market is to grow at 10.7 per cent CAGR during the five years. There are some 3, 000 apartments coming up during the next three years and 6,5oo hotel rooms.
Mr. Perera noted that the key concern in the tile sector is cheap imports. “These imports now account for approximately 60 per cent,” he said noting that they come primarily from China. Analysts say that cheap tile imports, sanitary ware, glass and tableware from China, India, Indonesia and other Asian suppliers still remain a significant threat to the local industry and many call for anti-dumping legislation to stop substandard items coming into the island.
Tiles and associated products continued to be the highest contributor of 59.4 per cent for RCL during the last quarter. By next year RCL will be expanding capacity to cater to demand for larger format tiles. Mr. Perera added that with rising incomes, many rural households will turn to tiling their homes.
Access Engineering Managing Director Christopher Joshua noted at the panel discussion that total construction industry exposure in the banking industry was nearly Rs. 4 trillion last year, according to Central Bank data. Of this, commercial banks’ loans and advances to construction was at Rs. 811 billion. Lending to personal housing was at Rs. 387 billion. Lending to bank staff housing was Rs. 69 billion. Lending to contractors and developers was Rs. 355 billion. Lending to contractors and developers was for all sorts of projects including toads, bridges, etc.
Mr. Joshua said that large-scale infrastructure was held up during last year as there were many funding constraints from the Government. He told the Business Times that progressive proposals aimed at aimed at housing and construction in the recent budget will see many of these constraints ease.
Prime Lands Group Chairman and Co-Founder Brahmanage Premalal noted that as opposed to a few years ago, now amenities such as a gymnasium and a swimming pool are a necessity to include in apartment complexes. “Earlier they used to predominantly be a feature of high end at high rise residential buildings but now it’s not so.” He stressed that the pricing point is key when marketing apartments and that location is also what buyers are more interested in.