New Delhi, March 24 According to JLL India, the construction cost of real estate projects is likely to increase by 3-5 per cent this calendar year due to higher input prices, including labor.
Real estate consultant JLL released 'Construction Cost Guide, India - 2026' on Tuesday, which estimated that construction costs are projected to rise by 3-5 per cent across all asset classes in 2026.
In 2025, material costs presented a mixed picture with divergent trends across categories.
"Prices of cement, steel, and diesel showed a mild decrease of 1-2 per cent, 3-4 per cent, and 5-6 per cent, respectively, while aluminum 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," JLL said.
Labor costs increased by 5-6 per cent across all categories, driven by a shortage of skilled labor and demand for infrastructure.
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 that the "new labor code, which came into effect in November 2025, mandates enhanced social security benefits, healthcare coverage, and standardized wage frameworks, driving labor 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 could have an impact on project economics.
"Construction costs in 2026 are expected to rise 3-5 per cent, driven by regulatory changes, a shortage of skilled labor, 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, real estate bodies CREDAI and NAREDCO said that the real estate industry has started facing a short supply of some building materials, and said that construction costs could rise if the situation continues for a longer period.
The two associations, which together represent 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 that "the ongoing conflict in West Asia 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 optimization 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 optimization, he added.
"While near-term challenges persist, underlying housing demand in India continues to remain resilient," Gowda said.
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