Construction costs in India are projected to rise 3-5% across all asset classes in 2026, according to JLL’s Construction Cost Guide, India – 2026, released on Tuesday.

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%, 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, said the report.

Labor costs are experiencing the most consistent upward pressure, increasing by 5-6% across all categories, driven by skilled labour shortages and infrastructure demand.

“While 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, the new labour code which took effect in November 2025, mandate enhanced social security benefits, healthcare coverage, and standardized wage frameworks, driving labour costs up 5-12% across all skill categories. The net result: construction costs may rise 3-5% this year which may have an impact on project economics,” said the JLL report.

The cost increase comes at a time when India’s economy remains robust, with GDP growth projected at 7.4%, foreign direct investment rising 14%, and infrastructure spending running at 1.3 times the previous two-year average. Together, these factors are driving sustained demand across residential, commercial, and industrial real estate.

“What we are witnessing across India’s six major cities tells the story: 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. Those who remain vigilant and adapt proactively will capture outsized opportunities in this transformed landscape,” said Aditya Desai, Executive Director, PDS, India, JLL.

While labour costs and regulatory changes are pushing expenses higher, softer material prices, policy support, and strong demand are helping keep overall cost increases in check.

“Construction costs in 2026 are expected to rise 3-5%, 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. Despite rising global construction costs and market uncertainty, significant opportunities are emerging. The sector’s shift toward sustainability, digital transformation, and adaptive practices creates a strong rationale for strategic investment. Companies prioritizing agility and operational efficiency today will build enduring competitive advantages that extend well beyond 2026 in an increasingly dynamic market environment” said Ashok VS, Head of Cost Management, JLL PDS, India.