Construction costs across all asset classes in India projected to increase 3-5% in 2026: JLL

India's construction industry is experiencing a significant transformation, driven by strong economic fundamentals, evolving market dynamics, and transformative regulatory reforms, with construction costs projected to rise 3-5% across all asset classes in 2026 according to JLL's Construction Cost Guide, India - 2026 released today. 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. 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 delivers 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.

This trend also reflects the construction industry's strategic shift toward long-term value creation while navigating significant regulatory changes and evolving market dynamics.

"Success in 2026 belongs to those who evolve beyond cost management to strategic transformation. What we are witnessing across India's six major cities tells the story: Mumbai commands INR 4,600-5,200 per sq. ft. for luxury high-rises, while Chennai, Bangalore, and Hyderabad deliver competitive rates at INR 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.

The changing world dynamics is causing disruption to energy markets and prices. However, currently it is impossible to gauge whether there will be any lasting impact or not.

"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.

The bottom line

India's construction sector in 2026 is defined by resilience amid transformation. Material costs have stabilized following several years of price volatility, and while geopolitical factors continue to evolve, the sector is positioned to deliver strong growth supported by favorable regulatory reforms and robust expansion across all market segments. The 3-5% cost increase represents remarkable stability given the magnitude of regulatory changes underway. Developers who embrace workforce formalization, leverage GST savings strategically, and invest in technology adoption will emerge as leaders in this dynamic landscape.

Source : Equity Bulls

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JLL ConstructionIndustry India CostIncrease ConstructionCost LabourCost MaterialCost Aluminium Copper Cement Steel