Before you compare two builders' rates, decide what kind of contract you are signing. In Kerala most houses are built on one of two models: a labour contract, where you buy the materials and the contractor supplies the workers, or a turnkey contract, where one firm supplies materials, labour and coordination for an agreed scope. The headline rates are not comparable — one excludes materials entirely — and the real difference is who carries the risk.
The short answer
A labour contract can work for an owner who lives near the site, has time to visit almost daily, knows the materials and has reliable suppliers. A turnkey contract suits most families who cannot manage a site themselves — busy professionals, first-time builders and anyone living outside Kerala — provided the scope, specifications and payment stages are written down in detail before signing.
What each contract actually means
- Labour-only contract — you buy and deliver cement, steel, blocks, sand and aggregate; the contractor brings the workers, usually with tools, shuttering and scaffolding. Labour is priced per sq ft, per stage of work or per day.
- Item-rate contract — the contractor supplies materials and labour, and is paid for measured quantities at the rates in a bill of quantities (BOQ). Rates are fixed; quantities move with the work.
- Turnkey or design-and-build — one firm takes responsibility for an agreed design and construction scope for a fixed price, paid in stages. This is how our turnkey design and build service works.
- Cost-plus — you pay actual cost plus a fee. Rare for houses; you carry the cost risk and have to audit every bill.
Side by side
| Labour contract | Turnkey / design and build | |
|---|---|---|
| Who buys materials | You | The builder |
| Your time on site | Very high — near-daily checks | Low — milestone reviews |
| Price certainty | Low — you carry material price and quantity risk | High, if scope and specifications are tight |
| Wastage and theft | Your loss | The builder's loss |
| Quality control | You choose brands; workmanship is someone else's | One party answers for both |
| Accountability | Split between you, suppliers and labour | Single point of contact |
| Changes mid-build | Easy, at your cost | Through a written, priced change order |
| Suits | An experienced owner living nearby | Busy owners, NRIs, first-time builders |
The real cost picture, including GST
Materials are the larger share of a house's cost, so the instinct to save the contractor's margin by buying them yourself is understandable. In practice the saving is smaller than it looks: a builder buys in bulk, carries the wastage, and does not lose days when a delivery is late. In a labour contract every short delivery, price rise and idle day is your cost.
GST is where most comparisons go wrong. A pure labour contract for the original construction of a single residential house is exempt from GST under entry 11 of Notification 12/2017-Central Tax (Rate). The exemption is lost if the contractor supplies any material, and it may not apply to repairs or to a building with more than one unit. A works contract — materials plus labour — for a private house is taxed at 18% (9% CGST + 9% SGST); the old 12% entry for a single residential unit was removed from 18 July 2022 by Notification 03/2022. The September 2025 rate changes did not alter this.
That does not make turnkey simply 18% dearer. On a labour contract you still pay GST on every bag of cement and length of steel you buy, and as a homeowner you cannot claim it back. Ask your chartered accountant to compare the two on your actual figures, and ask every contractor whether their quote includes GST and for their GSTIN.
What a labour contract asks of you in Trivandrum
- Ordering and checking more than a hundred different materials, and having the money ready from day one.
- Being on site, or sending someone, to count deliveries, check mixes and approve each stage.
- Coordinating separate masons, bar benders, electricians, plumbers and carpenters, and the gaps between them.
- Handling unloading. Demands for 'nokku kooli' — charges for unloading work not done — were declared illegal by the Kerala High Court in 2022, but receiving your own materials still puts you in the middle of it.
- Owning the dispute when something fails: a leak can always be blamed on the material you bought or the work someone else did.
Where turnkey goes wrong — and how to prevent it
A turnkey price is only as good as what it describes. The common failures are a scope that covers the structure but not the finishes, specifications written as 'standard' or 'equivalent', low allowances for tiles and fittings that you then top up, and no agreed way to price changes. Each of these turns a fixed price into a moving one.
- Ask for an itemised BOQ against the approved drawings, not a single per-sq-ft figure — see how to compare proposals.
- Get a specification schedule that names brands and grades for cement, steel, wiring, tiles, sanitary ware and paint.
- Check every allowance — a per-sq-ft tile allowance that is too low is a hidden extra.
- Tie each payment to completed, measurable work, and avoid large advances.
- Agree in writing how changes are priced and approved before work starts.
Which one suits you
If you live in Trivandrum, have built before and can be on site most days, a labour contract gives you control at the cost of your time. If you are working full time, building for the first time or living abroad, a turnkey contract with a detailed BOQ is usually the safer route — read our NRI house construction guide if you will be managing from overseas. Some owners split the difference: a labour contract for the structure, with finishes contracted separately, or an independent engineer supervising a contractor.
What to put in the written agreement
- Scope with inclusions and exclusions, and the approved drawings attached.
- The BOQ and specification schedule, with brands, grades and allowances.
- Payment stages tied to milestones, with a retention held until defects are fixed.
- A change-order process with pre-agreed rates for additions and omissions.
- Start and completion dates, what happens if they slip, and who obtains the permit and completion certificate.
- A defect liability period and how defects are reported and fixed.
The contract type decides who pays when something goes wrong. Decide that first; compare rates second.
Sources
- CBIC — Notification 12/2017-Central Tax (Rate), entry 11GST exemption for pure labour contracts on a single residential unit.
- GST Council — Notification 03/2022-Central Tax (Rate)Removed the 12% entry for single residential units from 18 July 2022.
- Department of Expenditure — Manual for Procurement of Works (draft, 2025)Definitions of lump-sum, item-rate and design-and-build contracts.
