Real estate expects up to 10% spike in baseline labour cost

With four labour Codes having been made effective, real estate is bracing itself for an increase in baseline labour costs of 5-10 per cent over the next one year, with labour making up close to one-fourth of project costs.

- SANKET KOUL, PRACHI PISAL & ANEEKA CHATTERJEE

According to industry executives, labour accounts for 25-30 per cent of project costs, and hence a structural change affects developers’ projections.

"We are estimating a baseline increase of 5-10 per cent over 12 to 18 months," said Sujay Kalele, founder, Mumbai-based MD TRU Realty.

Suruchi Kumar, partner at law firm Shardul Amarchand Mangaldas, said some increase was inevitable at the start because the Codes restricted exclusions from wages to no more than 50 per cent (of the people employed), and statutory contributions like the provident fund, gratuity and overtime calculations would rise for certain categories of employees, such as gratuity for fixed-term contracts.

"Similarly, the Social Security Code’s Chapter III expands the net of workers eligible for benefits, which brings an additional contribution load," Kumar added.

Experts say while the transition may be detailed, once it settles, having one consolidated regime instead of 29 scattered laws should make compliance far more predictable.

"The plan is to rebuild payroll structures, sync contractors on the new requirements, and move all registers and workforce data on to a digital workflow," Kumar said.