The Four Labour Codes: Transforming India’s Real Estate & Construction Sector — A Balanced Analysis

The real estate and construction sector is India’s second-largest employer after agriculture, absorbing millions of workers—engineers, supervisors, contract labourers, migrant workers, machine operators, and site staff. The introduction of the four consolidated labour codes marks a significant regulatory shift for builders and developers.

These codes aim to modernise labour laws, ensure safe working conditions, streamline compliance, and expand social security. However, for the infrastructure and real estate ecosystem—characterised by subcontracting, seasonal labour, and migrant-heavy workforces—the transformation brings both opportunities and challenges. 

This article examines the positive and negative impacts of each labour code on India’s builders, developers, and real estate companies.

1. Code on Wages, 2019

Positive Impact

Uniform definition of wages (50% rule) simplifies payroll across multiple states.

Ensures timely payment, reducing disputes with workers and contractors.

Establishes a national floor wage, preventing exploitation of low-paid construction workers.

Promotes fair and transparent wage practices, improving trust at project sites.

Negative Impact

Increases the cost of labour due to higher PF, gratuity, and overtime obligations.

Forces developers to restructure wage components, raising contractor billing rates.

May lead to higher project costs and budget overruns, especially in labour-intensive projects.

2. Code on Social Security, 2020

Positive Impact

Extends PF, ESIC, gratuity, and insurance to:

Contract labour

Migrant workers

Platform and gig workers

Enhances accident insurance coverage, reducing liability risks.

Portability of benefits makes it easier for migrant labour to move across projects.

Boosts worker welfare, improving site morale and long-term retention.

Negative Impact

Substantial cost escalation as contractors must contribute to PF/ESIC for large temporary workforces.

Administrative burden of registering and tracking mobile/migrant workers.

Increased risk of non-compliance penalties for principal employers if contractors fail to comply.

Higher compliance may lead to a shortage of informal labour, affecting project timelines.

3. Occupational Safety, Health & Working Conditions(OSH) Code, 2020

Positive Impact

Stronger safety norms reduce onsite accidents and liabilities.

Mandatory provisions for:

Clean drinking water

First aid rooms

Safety officers

Protective gear

Medical check-ups

Women allowed in all roles (including night shifts) with safety measures—expanding the talent pool.

Creates a more organised and professional construction ecosystem, aligning with global standards.

Negative Impact

Compliance costs rise due to:

Safety officers

Ambulance facilities (for bigger sites)

Protective equipment

Medical facilities

Small and mid-size builders may find these obligations financially intensive.

Increased monitoring may cause frequent inspections, delaying work.

Employers may face penalties for hazardous working conditions during peak construction phases.

4. Industrial Relations Code, 2020

Positive Impact

Provides clearer frameworks for dispute resolution and grievance handling.

Simplifies hiring through fixed-term employment—ideal for project-based staffing.

Raises threshold for standing orders to 300 workers, offering flexibility for medium-sized builders.

Reduces industrial disruptions by promoting structured negotiations.

Negative Impact

Seasonal labour movements and subcontracting may still lead to frequent disputes.

Increased employee voice and unionisation potential in large projects.

Stricter rules on layoffs and closure increase legal exposure for developers managing multiple subcontractors.

Delays may occur if disputes escalate, affecting project delivery timelines.

Overall Positive Impact on Real Estate & Developers

Professionalisation of labour management across construction sites.

Higher safety and welfare standards, reducing accident risks and reputational issues.

Digital compliance (online registers, e-inspections) enhances efficiency.

Promotes ethical labour practices, supporting ESG reporting for large developers.

Brings uniformity across states—critical for developers with pan-India presence.

Overall Negative Impact on the Sector

Higher cost of construction, affecting profit margins.

Increased administrative and compliance load due to documentation and digital registers.

Contractors may increase charges, making projects costlier.

Possible labour shortages as formalisation increases costs for small players.

Tightened enforcement may cause project delays if non-compliance is identified.     

Conclusion

The four labour codes represent a major shift toward safer, more transparent, and welfare-oriented labour practices in India’s real estate and construction sector.

For builders and developers, these reforms offer long-term advantages—better workforce stability, improved safety standards, and reduced dispute risk.

However, the transition also brings short-term challenges: rising costs, compliance-heavy processes, contractor accountability, and a greater need for documentation and governance.

For the sector to fully benefit,developers will need to:

Strengthen contractor management systems

Invest in digital compliance tools

Adopt transparent wage and welfare practices

Redesign cost structures and budgets

Build safety and ESG frameworks into core operations

In the long run, the labour codes have the potential to elevate India’s construction industry to international standards—but only if implemented with preparedness, clarity, and strong on-ground governance