Real Estate Projects to See 3-5% Construction Cost Increase in 2026

New Delhi, Mar 24 (PTI) The construction cost of real estate projects is likely to rise by 3-5 per cent this calendar year due to higher prices of inputs, including labor, according to JLL India.

Real estate consultant JLL released 'Construction Cost Guide, India - 2026', which estimated that the construction costs are projected to rise 3-5 per cent 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 per cent, 3-4 per cent, and 5-6 per cent, respectively. However, aluminium and copper costs experienced more significant increases of 8-9 per cent and 9-10 per cent, respectively, driven by global demand pressures and supply chain dynamics.

Labour costs increased by 5-6 per cent 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 per cent tax relief on cement, promising savings of 2-3 per cent for developers and property prices by 1-1.5 per cent for homebuyers.

However, JLL said 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 per cent across all skill categories'. The net result would be a possible 3-5 per cent 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 labor 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 said the real estate industry has started facing a short supply of some building materials, and said construction costs could rise if tensions continue for a longer period. The two associations, together 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 price 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.