Despite GST cuts on cement and key materials, rising labour costs and global price pressures are pushing construction expenses higher, adding to the burden on homebuyers in 2026
Compared to 2025, the construction sector is seeing mixed trends. While prices of cement, steel and diesel dipped slightly (1-6%), key materials like aluminium and copper have surged by 8-10%. Global demand and supply chain disruptions are driving up these costs. At the same time, a shortage of skilled labour has pushed wages up by 5-6%, adding to developers’ burden.The government’s ‘GST 2.0’ initiative last year reduced cement taxes by 10%, which was expected to lower overall construction costs by 2-3% and slightly reduce home prices. However, new labour laws introduced in November 2025 offset these gains. With better wages, insurance and social security benefits for workers, labour costs have jumped by 5-12%.All these factors combined are expected to push overall construction costs up by 3-5% in 2026, according to JLL India. This increase will not only affect large projects but also individuals planning to build their own homes. Experts warn it could lead to around 5% inflation in the real estate sector, increasing the financial burden on homebuyers.While the government aims to provide relief through tax cuts, rising raw material prices and changes in labour laws are creating new challenges for the construction sector. If developers are unable to absorb these costs, the burden is likely to fall on buyers.
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When the government cut GST on nearly 200 items last September, many expected a drop in prices of essentials and construction materials. However, the reality has been quite different. Soon after the tax cut, manufacturers raised prices, wiping out the expected benefits. Despite a 10% GST reduction on cement, rising input costs could push home construction expenses up by around 5% this year, experts warn.
