Construction Costs to Rise 3–5% in 2026: JLL

26 Mar 2026 CW Team

The report highlights mixed trends in material costs during 2025. Cement, steel and diesel prices declined by 1–2 per cent, 3–4 per cent and 5–6 per cent respectively, while aluminium and copper recorded sharper increases of 8–9 per cent and 9–10 per cent, driven by global demand and supply chain pressures. For 2026, prices of steel, aluminium and copper are projected to increase moderately by 2–4 per cent, while cement costs remain lower following tax reforms.

A major cost driver is labour. Wages are expected to rise 5–12 per cent after the implementation of the new labour codes in November 2025, which mandate enhanced social security, healthcare benefits and standardised wages. Even in 2025, labour costs rose steadily by 5–6 per cent due to skilled workforce shortages and strong infrastructure demand.

The government’s GST 2.0 reform has provided some relief, reducing cement taxation by 10 per cent, translating into savings of 2–3 per cent for developers and up to 1.5 per cent for homebuyers. However, these gains are likely to be offset by rising labour expenses.

Aditya Desai, Executive Director, PDS, India, JLL, said cost variations across cities are reshaping investment patterns, with Mumbai commanding Rs 4,600–5,200 per sq ft for luxury projects, while Chennai, Bengaluru and Hyderabad remain relatively competitive.

Ashok VS, Head of Cost Management, JLL PDS India, noted that digital adoption and sustainability-focused practices will be key to managing cost pressures while unlocking long-term value.

Despite global uncertainties and energy market disruptions, the sector remains resilient. Stable material costs, supportive policy reforms and continued expansion are expected to sustain growth, with developers focusing on efficiency, technology adoption and workforce formalisation to stay competitive.

Construction costs across asset classes in India are expected to rise by 3–5 per cent in 2026, according to a new report by JLL, reflecting a sector undergoing structural transformation amid regulatory shifts and evolving market dynamics.The report highlights mixed trends in material costs during 2025. Cement, steel and diesel prices declined by 1–2 per cent, 3–4 per cent and 5–6 per cent respectively, while aluminium and copper recorded sharper increases of 8–9 per cent and 9–10 per cent, driven by global demand and supply chain pressures. For 2026, prices of steel, aluminium and copper are projected to increase moderately by 2–4 per cent, while cement costs remain lower following tax reforms.A major cost driver is labour. Wages are expected to rise 5–12 per cent after the implementation of the new labour codes in November 2025, which mandate enhanced social security, healthcare benefits and standardised wages. Even in 2025, labour costs rose steadily by 5–6 per cent due to skilled workforce shortages and strong infrastructure demand.The government’s GST 2.0 reform has provided some relief, reducing cement taxation by 10 per cent, translating into savings of 2–3 per cent for developers and up to 1.5 per cent for homebuyers. However, these gains are likely to be offset by rising labour expenses.Aditya Desai, Executive Director, PDS, India, JLL, said cost variations across cities are reshaping investment patterns, with Mumbai commanding Rs 4,600–5,200 per sq ft for luxury projects, while Chennai, Bengaluru and Hyderabad remain relatively competitive.Ashok VS, Head of Cost Management, JLL PDS India, noted that digital adoption and sustainability-focused practices will be key to managing cost pressures while unlocking long-term value.Despite global uncertainties and energy market disruptions, the sector remains resilient. Stable material costs, supportive policy reforms and continued expansion are expected to sustain growth, with developers focusing on efficiency, technology adoption and workforce formalisation to stay competitive.

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