India's Construction Industry Set for Cost Increases: Report
Synopsis
A recent report indicates that India's construction costs are expected to rise by 3-5% by 2026. This is driven by increasing labor costs and metal prices, highlighting the need for developers to adapt strategically.
Key Takeaways
Projected 3–5% increase in construction costs by 2026.
Labour costs rising 5-6% across all categories.
Mixed trends in material costs with some decreases and increases.
Importance of technological investment and workforce formalization.
GST reforms offer significant tax relief for developers.
New Delhi, March 24 (NationPress) The construction sector in India is projected to witness a 3–5 percent increase in costs across various asset classes by 2026, primarily due to rising labour expenses and escalating metal prices, according to a recent report released on Tuesday.
Developers that adopt formal workforce practices, strategically utilize GST savings, and invest in technological advancements are expected to lead in this evolving market, the report highlighted.
According to the report from JLL, a prominent real estate services firm, material costs displayed a mixed trend in 2025. Notably, prices for cement, steel, and diesel saw reductions of approximately 1–2 percent, 3–4 percent, and 5–6 percent respectively. In contrast, aluminium and copper prices surged by 8–9 percent and 9–10 percent, influenced by global demand and supply chain factors.
Labour costs are under significant upward pressure, increasing by 5–6 percent across all skill categories, largely due to shortages of skilled workers and robust infrastructure demand, the report noted.
"India’s construction landscape is undergoing a remarkable transformation, propelled by strong economic fundamentals, changing market conditions, and impactful regulatory reforms," the report stated.
While GST reforms have offered a 10 percent tax reduction on cement, leading to potential savings of 2-3 percent for developers and 1-1.5 percent for homebuyers, the new labour code has mandated enhanced social security benefits, healthcare coverage, and standardized wage structures, resulting in increased labour costs of 5-12 percent across all skill levels.
This trend underscores the construction industry’s strategic move towards long-term value generation while adapting to significant regulatory transformations and shifting market dynamics, the report noted.
“In Mumbai, luxury high-rises are priced at Rs 4,600-5,200 per sq. ft., whereas Chennai, Bangalore, and Hyderabad offer competitive rates ranging from Rs 4,200-4,800 per sq. ft. This isn’t merely a cost variation—it is fundamentally reshaping capital allocation, driving Tier-II expansion, and redefining the real estate landscape in India,” remarked Aditya Desai, Executive Director, PDS, India, JLL.
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Point of View
It will be crucial for developers to innovate and optimize their strategies to remain competitive.
NationPress
10 May 2026
Frequently Asked Questions
What is driving the increase in construction costs in India?
The increase in construction costs is primarily driven by rising labor expenses and higher metal prices.
How much are costs expected to rise by 2026?
Costs are projected to rise by 3-5% across various asset classes by 2026.
What strategies can developers use to manage costs?
Developers can embrace workforce formalization, leverage GST savings, and invest in technology adoption to manage costs effectively.
What impact do GST reforms have on construction costs?
GST reforms provide a 10% tax relief on cement, leading to potential savings for both developers and homebuyers.
How are labor costs affecting the construction industry?
Labor costs are increasing by 5-6% due to shortages of skilled labor and a strong demand for infrastructure.
