India’s construction industry is likely to see a 3–5 per cent rise in costs across asset classes in 2026 amid rise in labour costs and higher metal prices, a report said on Tuesday.
Developers who embrace workforce formalisation, leverage GST savings strategically, and invest in technology adoption will emerge as leaders in this dynamic landscape, the report noted.
The report from real estate services firm JLL said material costs showed mixed trend in 2025 as cement, steel and diesel dropped by about 1–2 per cent, 3–4 per cent and 5–6 per cent respectively, while aluminium and copper jumped 8–9 per cent and 9–10 per cent on global demand and supply chain dynamics.
Labour costs are experiencing the most consistent upward pressure, increasing by 5-6 per cent across all categories, driven by skilled labour shortages and infrastructure demand, it added.
“India’s construction industry is experiencing a significant transformation, driven by strong economic fundamentals, evolving market dynamics, and transformative regulatory reforms,” the report said.
Though GST reforms provided 10 per cent tax relief on cement, promising savings of 2-3 per cent for developers and 1-1.5 per cent for homebuyers, the new labour code mandated enhanced social security benefits, healthcare coverage, and standardised wage frameworks, driving labour costs up 5-12 per cent across all skill categories.
This trend also reflects the construction industry’s strategic shift toward long-term value creation while navigating significant regulatory changes and evolving market dynamics, it noted.
“Mumbai commands Rs 4,600-5,200 per sq. ft. for luxury high-rises, while Chennai, Bangalore, and Hyderabad deliver competitive rates at Rs 4,200-4,800 per sq. ft. This isn’t just a cost differential—it is fundamentally reshaping capital allocation, driving the Tier-II expansion, and redefining India’s real estate geography,” said Aditya Desai, Executive Director, PDS, India, JLL.
