Real Estate Construction Costs Set to Rise by 3-5% in 2026 Due to Higher Labour Rates: JLL

The construction cost of real estate projects is expected to rise by 3-5% this calendar year, driven by higher prices of inputs, including labour, according to JLL India.

Real estate consultant JLL released the 'Construction Cost Guide, India - 2026', which estimated that construction costs will increase by 3-5% across all asset classes in 2026.

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% respectively, 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.

Labour costs increased by 5-6% across all categories, driven by skilled labour shortages and infrastructure demand. The consultant noted that the government's GST 2.0 initiative delivered a critical 10% tax relief on cement, promising savings of 2-3% for developers and property prices by 1-1.5% for homebuyers.

However, 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 by 5-12% across all skill categories. The net result would be a possible 3-5% rise in construction costs this year, which might have an impact on project economics.

'Construction costs in 2026 are expected to rise 3-5 per cent, 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,' said Ashok VS, Head of Cost Management, JLL PDS, India.

On Monday, realtors' bodies CREDAI and NAREDCO expressed concerns about the real estate industry facing a short supply of some building materials, which could lead to construction cost increases if tensions continue for a longer period. The two associations, representing around 20,000 developers, also expressed concern about possible delays in the completion of real estate projects due to likely shortages of construction materials.

Bengaluru-based Sanjeevini Group Chairman and Founder Umesh Gowda H A said, 'The ongoing West Asia conflict is beginning to reflect on India's real estate sector through rising input costs. The need of the hour is to proactively seize opportunities for cost optimisation without having to increase prices for end-users.' The industry has navigated similar cycles in the past, and the company remains focused on efficient planning and cost optimisation, he added.

While near-term challenges persist, underlying housing demand in India continues to remain resilient, Gowda said.