Having a house of one’s own is the biggest dream of every common man. But if you are planning to buy or build a house in 2026, then the mathematics of your budget may get a little messed up. According to the latest report of the famous real estate consultancy firm JLL, the construction cost in India is expected to increase by 3 to 5 percent in 2026. The real estate sector is growing rapidly amid a strong economy and GDP growth of 7.4%, but this increase in costs can become a matter of concern for the common buyer. Let us understand why building a house is becoming expensive.
Wages spoil the budget, some relief from construction material
The biggest reason behind this increasing cost is the increase in wages. There has been a major change in the salaries and allowances of workers since the new Labor Code came into force in November 2025. Due to new social security policies, healthcare coverage and standardization of wages, there has been a huge increase in labor cost ranging from 5 to 12 percent. Along with this, lack of skilled artisans in the market has also increased this problem.
However, it is a matter of relief that there is a mixed situation on the construction material front. Cement prices have fallen by 1-2%, steel by 3-4% and diesel by 5-6%. But due to global demand and problems in the supply chain, the prices of metals like aluminum and copper have increased by 8 to 10 percent. The falling prices of cement and steel have worked to balance this inflation to a great extent.
Common man will get benefit of GST 2.0
The government’s GST 2.0 policy has emerged as a big relief in these challenging times. Under this policy, the tax on cement has been reduced by 10%. Cement is the most important part of any construction. Due to this tax exemption, builders are getting direct savings of 2 to 3 percent in their costs. Experts believe that the benefits of this savings will also reach the final buyer and this may reduce property prices by 1 to 1.5 percent, which will provide a much-needed relief amid rising inflation.
Real estate trend from expensive cities to small cities
This difference in cost has also started changing the geography of real estate in the country. Today, the construction cost of luxury high-rise buildings in a city like Mumbai has reached Rs 4,600 to Rs 5,200 per square foot. Whereas in cities like Bengaluru, Chennai and Hyderabad it is between Rs 4,200 to Rs 4,800 per square foot. Due to this huge cost difference, big builders are now turning to Tier-2 and emerging cities.
Apart from this, the demand for ‘premium’ homes is now increasing rapidly in the Indian market. Where the average house price used to be Rs 80 lakh in the financial year 2023, it has now increased to Rs 1.2 crore in 2026. Homes priced above Rs 2 crore now account for 45-50% of the market. Developers have higher margins in these expensive projects, which allows them to easily absorb the rising construction costs.