Construction costs for real estate projects are expected to rise by 3–5% across asset classes in 2026, driven by higher input costs, including labour, which may increase by 5–12% following the implementation of the new labour code in November 2025, according to JLL’s Construction Cost Guide, India – 2026 released on March 24.
In 2025, material costs presented a mixed picture with divergent trends across categories. Cement, steel and diesel prices showed a mild decrease of 1-2%, 3-4% and 5-6%, while aluminium and copper costs experienced more significant increases of 8-9% and 9-10% respectively, driven by global demand pressures and supply chain dynamics, it said.
Labour costs are experiencing the most consistent upward pressure, increasing by 5-6% across all categories, driven by skilled labour shortages and infrastructure demand, it said
While the government’s GST 2.0 initiative delivers a critical 10% tax relief on cement, promising savings of 2-3% for developers and property prices by 1-1.5% for homebuyers, the new labour code which took effect in November 2025, mandates enhanced social security benefits, healthcare coverage, and standardized wage frameworks, driving labour costs up 5-12% across all skill categories. The net result: construction costs may rise 3-5% this year, which may affect project economics, it said.
This trend also reflects the construction industry’s strategic shift toward long-term value creation while navigating significant regulatory changes and evolving market dynamics.
“What we are witnessing across India’s six major cities tells the story: Mumbai commands ₹4,600-5,200 per sq. ft. for luxury high-rises, while Chennai, Bengaluru, and Hyderabad deliver competitive rates at ₹4,200-4,800 per sq. ft. This isn’t just a cost differential—it is fundamentally reshaping capital allocation, driving the Tier-II expansion, and redefining India’s real estate geography. Those who remain vigilant and adapt proactively will capture outsized opportunities in this transformed landscape,” said Aditya Desai, Executive Director, PDS, India, JLL.
“Construction costs in 2026 are expected to rise 3-5%, driven by regulatory changes, skilled labour scarcity, and stricter environmental standards. Digital technologies help offset these pressures by improving efficiency and delivering greater project value. Despite rising global construction costs and market uncertainty, significant opportunities are emerging.,” said Ashok VS, Head of Cost Management, JLL PDS, India.
On March 23, realtors’ bodies CREDAI and NAREDCO said the real estate industry has started facing a short supply of some building materials, and said construction costs could rise if the US-Iran crisis continues for a longer period.
