New Labour Codes May Push Real Estate Labour Costs Up by 8–12% and Delay Project Timelines

India’s real estate and infrastructure sectors are preparing for a period of adjustment as the new labour codes come into force. These reforms aim to improve worker welfare, formalisation and workplace safety. However, developers and contractors expect the transition to bring higher labour costs and possible delays in project execution, especially in a sector that employs around 71 million workers.

Labour Costs Expected to Increase 8–12%

The construction industry relies heavily on large workforces, many of whom are unskilled. With the new labour codes redefining the structure of wages, companies will no longer be able to lower statutory payouts through allowances. This directly increases contributions towards Provident Fund and gratuity.

Early estimates suggest that labour-related costs may rise by 8–12 percent, especially for large-scale projects such as metro corridors, expressways, housing complexes and commercial developments. PF contributions alone may rise by 30–35 percent in some cases due to the requirement that basic pay must form at least 50 percent of total wages.

The new rule making gratuity payable after just one year will also add to employer liabilities, particularly on project sites that have 400–500 fixed-term workers. In such cases, annual gratuity payouts may increase by ₹1–1.5 crore.

Why Are Cost Pressures Rising?

Key operational changes contributing to the cost increase include:

• A standardised definition of wages
• Higher PF and gratuity liabilities
• Double wages for overtime
• Increased documentation and compliance
• Labour contractors revising pricing to meet statutory norms

Together, these changes create a more structured system but push up immediate expenses for developers.

Project Timelines May Face Delays

Apart from higher costs, developers expect timeline disruptions as they adjust to new compliance requirements. Real estate and infrastructure projects often operate across multiple locations with rotating labour teams. Activities such as worker verification, safety training and maintaining updated records could temporarily slow down mobilisation.

For housing projects governed by RERA, even slight delays in documentation or audits may affect delivery deadlines. Large infrastructure projects like metro routes, highways and logistics hubs may experience extended mobilisation cycles due to stricter safety norms and certification processes.

Although timelines may stretch by a few months initially, better safety standards and more predictable work processes could reduce accidents and stoppages in the long term.

Read more: Infosys Buyback: How Much Tax Will You Pay on The Buyback Amount?

Conclusion

The new labour codes mark a major shift for India’s real estate and infrastructure industries. While companies are likely to face 8–12% higher labour costs and short-term delays in project timelines, the reforms also aim to create a more stable and secure environment for millions of workers. As the sector adapts, it may benefit from improved productivity and stronger compliance structures over time.

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