Labour Shortage and Rising Costs Strain Mumbai's Real Estate Market

Mumbai’s real estate engine is sputtering, with construction slowing, costs spiralling, and delivery timelines slipping. The sector is grappling with an execution crisis amid a severe labour shortage and a surge in material costs driven by ongoing geopolitical tensions.

The industry has long depended on skilled workers from eastern states such as West Bengal, Odisha, Uttar Pradesh, and Bihar. In recent months, however, thousands have quietly returned home, citing shifting regional dynamics and changing economic opportunities.

This is not a temporary dip, developers said. It is beginning to look like a structural shortage.

As migrant workers exit construction sites in large numbers and global conflicts disrupt fuel supply chains and material availability, developers are being hit from both ends. The twin shocks are not just squeezing execution; they are fundamentally reshaping project viability, pushing construction costs higher and leaving the property market on edge, said Vishal Ratanghayra, founder and CEO of Platinum Corp.

Construction accounts for 30-35 per cent of a project’s cost. A 25-30 per cent rise in construction costs — including materials and labour — can push overall project costs up by at least 10 per cent, he said, adding that the increase will ultimately be passed on to buyers unless developers absorb the hit to already thin margins.

The crisis has been compounded by disruptions in Gujarat’s Morbi, India’s ceramic and tile hub, where hundreds of factories have either shut down or scaled back operations. The fallout has been immediate, with shortages of tiles and finishing materials critical to the final stages of construction.

This isn’t a slowdown on paper — it’s a daily on-site challenge. Reverse migration from West Bengal, Odisha, Uttar Pradesh, and Bihar has reduced 15-20 per cent of our skilled workforce, eroding not just numbers but critical expertise in finishing trades. In luxury housing, that loss impacts precision, pace, and confidence in delivery timelines, said Parthh Mehta, chairman and managing director of Paradigm Realty.

At the same time, the West Asia conflict has doubled propane costs, forcing over 400 Morbi factories to shut and turning tile and ceramic supplies from reliable to scarce. Prices have already risen by Rs 2-Rs 3 per square foot, with a 20-30 per cent increase expected once production resumes, he added.

These twin pressures — labour shortages and material disruptions — are straining timelines and cost buffers. With labour accounting for nearly a third of project costs, the impact is significant. Ultimately, buyers bear the brunt, often juggling rent and EMIs while awaiting delayed possession, he said.

Mayur Shah, the vice-chairman of Marathon Nextgen Realty, said workforce shifts, factory shutdowns, and rising costs could lead to delays and regulatory extensions similar to those seen during the Covid-19 pandemic.

Developers need sharper forecasting and execution. While margins may tighten, well-capitalised players are better placed to protect timelines and sustain buyer confidence, he said.

Prashant Khandelwal, joint secretary of CREDAI-MCHI and director and Chief Executive of Agami Realty, echoed the concern, saying the combined impact of labour shortages and cost escalation is putting sustained pressure on realty project delivery and profitability.