Labour-only, item-rate or turnkey: choosing a contractor
Design IRL Editorial · Figures checked 7 November 2026 · For owners comparing contractor quotes for a new house · How we make our guides
Two quotes for the same house can look very different because they're for different kinds of contract. Knowing the three models makes the numbers easier to compare.
The three models
| Model | What the contractor does | Typical rate (approx.) |
|---|---|---|
| Labour-only | Supplies workers; you buy all materials | ₹250–500 per sq ft of built-up area, plus your materials |
| Item-rate (BOQ) | Supplies and builds each item at an agreed measured rate | Priced item by item; contractor margin roughly 10–18% |
| Turnkey | Handles labour and materials for a lump sum or package | ₹1,800–3,500 per sq ft all-in; margin roughly 15–25% |
Labour-only often looks 10–20% cheaper than a full contract. That saving is real only if you have the time to buy materials, check deliveries and manage the site.
Who carries the risk
- Labour-only: you carry price rises, wastage and the quality of materials. You also manage the schedule.
- Item-rate: quantities can change, so the final bill moves with what is actually built. You need someone to measure work fairly.
- Turnkey: the contractor carries more of the price risk, which is part of why the margin is higher. Your risk shifts to specification. Vague specs let cheaper materials creep in.
How to compare quotes
Ask every bidder to price the same bill of quantities (BOQ), drawn from the same drawings. A contractor who will not share a BOQ is a warning sign. Check that each quote names the brands and grades of cement, steel, tiles, fittings and wiring, and says what is excluded. Compound wall, sump, borewell and approvals are often left out.
Get 2 to 3 quotes
Quotes for the same house can differ widely. Get at least 2 to 3, on the same BOQ, and keep a 10% contingency whichever you choose.
Which model suits you
- Labour-only can work if you live nearby, have time most days, and know materials or have an engineer who does.
- Item-rate suits owners with complete drawings and a clear BOQ, and someone to measure work at each stage.
- Turnkey suits owners who are busy or live away from the site, as long as the specification is written down in detail.
- Whichever you pick, hire your architect independently, so someone checks the contractor's work on your behalf.
Vetting checklist and red flags
- Verify GST registration, PAN and a real office address.
- Visit one finished site and one ongoing site.
- Call past clients you choose yourself, not only those the contractor suggests.
- Be wary of a refusal to share a BOQ, pressure to sign quickly, or a request for a large advance.
- Be wary of a very low quote with vague specifications.
What the contract should say
Put everything in a written agreement and have a lawyer review it. It should cover:
- Scope of work and material specifications, with brands and grades.
- Total cost, GST terms and the payment schedule.
- Timeline, delay penalties and how change orders are priced.
- Warranty, retention and the defects-liability period.
- Termination and dispute resolution.
Payment schedule and retention
Pay against work that has been checked, not by the calendar. Keep the advance small. A schedule like the one below is a reasonable starting point for a G+1 house.
| Milestone, checked complete | Share of contract |
|---|---|
| Agreement and mobilisation | 5% |
| Foundation, plinth beam and backfill | 15% |
| Ground-floor roof slab | 15% |
| First-floor roof slab | 15% |
| Brickwork, all floors | 10% |
| Plaster and concealed services | 10% |
| Flooring and tiling | 10% |
| Doors, windows and painting | 10% |
| Fittings, external works and handover | 5% |
| Retention, released after the defects period | 5% |
Retention of about 5–10% is usually held for a 6 to 12 month defects-liability period. If you have a home loan, bank tranches often arrive 1 to 3 weeks after each stage because of inspections. Line up the contractor schedule so you are never asked to pay before the bank can release.
Find the people
Sources
Most published cost figures come from firms that sell the work. We give ranges and you should get 2–3 quotes.
- NoBroker: 4 BHK house construction cost
- Houseyog: labour contract vs full contract
- Brick&Bolt: house construction cost in India 2026
- Brick&Bolt: questions to ask before hiring a construction company
- Brick&Bolt: safest payment structure for homeowners
- JK Cement: how to hire a reliable contractor
- Construction Estimator India: hiring a contractor
- Houseyog: sample contractor agreement (PDF)
- HDFC: home loan disbursement
- Tata Capital: subsequent disbursement