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Construction costs for real estate projects in India are expected to increase by 3-5 per cent this year, according to a report by JLL. The rise is attributed to higher labour expenses, regulatory changes and evolving environmental standards, despite some moderation in key material prices. While cement, steel and diesel costs declined marginally in the past year, metals such as aluminium and copper recorded notable increases. Labour costs have also risen due to skill shortages and implementation of new labour regulations. The report indicates that these combined factors could impact project viability and pricing dynamics across asset classes.
Construction costs across India's real estate sector are projected to rise by 3-5 per cent during the current calendar year, driven by labour cost escalation, regulatory changes and input price variations, according to a report released in the past week by JLL. Advertisement
The consultancy, in its Construction Cost Guide, India 2026, noted that cost pressures are expected to persist across residential, commercial and infrastructure-linked real estate developments. While certain material categories recorded price corrections in the previous year, increases in other inputs and labour expenses are expected to offset these benefits.
Data from the report shows that prices of key construction materials such as cement, steel and diesel declined marginally by around 1-2 per cent, 3-4 per cent and 5-6 per cent respectively during the past year. In contrast, aluminium and copper prices increased by 8-9 per cent and 9-10 per cent, reflecting global demand pressures and supply chain constraints.
Labour costs have emerged as a significant contributor to overall cost escalation. The report highlighted that labour expenses increased by 5-6 per cent across categories, primarily due to shortages of skilled workers and rising demand from infrastructure projects. In addition, the implementation of the new labour code in late 2025 has introduced enhanced social security benefits, healthcare provisions and standardised wage structures, leading to further increases in labour costs ranging from 5-12 per cent across skill segments.
The report also referenced the impact of policy measures such as the government's GST 2.0 initiative, which has reduced the tax burden on cement by around 10 per cent. This measure is expected to provide cost savings of 2-3 per cent for developers and marginal relief of 1-1.5 per cent for homebuyers. However, these savings are likely to be outweighed by rising labour and compliance-related costs.
A senior executive at JLL indicated that the overall increase in construction costs is being driven by a combination of regulatory changes, labour shortages and stricter environmental requirements. The executive added that developers are increasingly adopting digital technologies and process efficiencies to mitigate cost pressures and maintain project viability.
Industry bodies have also raised concerns about supply-side challenges. Representatives from developer associations indicated that certain building materials are currently witnessing short-term shortages, which could lead to delays in project execution if the situation persists.
Developers have stated that while efforts are being made to absorb part of the cost increase through efficiency measures, sustained pressure on input costs may eventually influence project pricing. At the same time, underlying housing demand across key markets remains stable, providing some support to the sector despite rising costs.
The projected increase in construction costs highlights the continued sensitivity of project economics to input price fluctuations and regulatory changes, particularly in a market where both demand and supply conditions are evolving simultaneously.
Source - PTI
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