What each contract actually covers
| Item | Turnkey | Labour contract |
|---|---|---|
| Material procurement | Contractor | You |
| Material storage and security on site | Contractor | You |
| Wastage risk | Contractor | You |
| Shortfall runs and emergency purchases | Contractor | You |
| Labour | Contractor | Contractor |
| Sequencing between trades | Contractor | Usually you |
| Single price | Yes | Labour only; material is open |
| Single completion date | Yes | Depends on material arriving |
| Defect accountability | One party | Split — was it material or workmanship? |
| GST treatment | On the whole contract | On labour; material taxed separately |
The cost comparison on a 2BHK
| Line | Turnkey | Labour contract |
|---|---|---|
| Labour, all trades | included | ₹3,80,000 |
| Material, at your purchase price | included | ₹8,20,000 |
| Wastage and shortfall purchases | contractor’s risk | ₹55,000 – 90,000 |
| Storage, transport, hoisting | included | ₹35,000 |
| Your time, 60 site visits | — | not costed, but real |
| Total, ex-GST | ₹14,20,000 | ₹12,90,000 – 13,25,000 |
A saving of roughly 7–9% in this example, against a headline expectation of 12–20%. The gap between the two is wastage and the purchases nobody budgets for.
What goes wrong on labour contracts
- Wastage is invisible until it is not. Plywood cutting lists, tile breakage and paint over-ordering routinely add 8–12% to a material budget. Under turnkey that is the contractor’s problem.
- Shortfalls stop work. Two sheets short on a Saturday afternoon means a labour gang standing idle on Monday, and in Mumbai you are paying for that day.
- Material on site is your material. Storage, damage and pilferage in an unoccupied flat are your risk.
- Defect arguments split. A swollen shutter becomes a debate about whether the board was poor or the sealing was poor, and nobody owns both.
- Deliveries need you. A society with restricted delivery hours and a booked service lift needs somebody to be there. That somebody is you.
When labour contract is genuinely the better deal
- When you have a trusted supplier network and buy materials regularly — some clients genuinely buy better than we do.
- When the scope is narrow: one kitchen, one bathroom, a painting job. Less to procure, less to sequence.
- When you are living in the flat during the works and are present anyway.
- When the material specification is unusual and you want to buy it yourself — a specific imported tile, a particular veneer bundle.
- When you have time. This is the real qualification, and it is worth being honest with yourself about it before signing.
Protecting yourself under either arrangement
- Under turnkey: require the specification to name board grades with standard numbers, hardware tiers with counts, and paint tiers with coat counts. A turnkey price against a vague specification is an invitation to substitute.
- Under turnkey: tie payments to milestones, not to dates, and hold five per cent until the snag list is closed.
- Under labour contract: agree the material list and quantities in writing before work starts, including who bears wastage above an agreed percentage.
- Under labour contract: agree what happens to the labour rate if work stops for want of material. Without that clause, every delay is billed to you.
- Under both: a dated programme, a documented snag list and a written workmanship warranty.
The hybrid most experienced clients end up using
There is a third arrangement that gets less attention and often fits best: a turnkey contract with a small number of client-supplied items, listed explicitly.
- The contractor carries the whole scope, the programme and the accountability, as in any turnkey contract.
- Two or three items are excluded and supplied by the client — typically appliances, sanitaryware and light fittings, where clients often have their own preferences or access.
- The exclusions are listed by name in the contract, with delivery dates against the programme, so a late-arriving appliance is not a dispute about who delayed whom.
- The contractor prices installation of client-supplied items as a separate line, so nobody pretends it is free.
- This keeps one party accountable for the fabric while letting the client buy the parts they care about. It is what we quote most often on residential work.
Verdict
| Your situation | Contract type |
|---|---|
| Full home, you work full time | Turnkey |
| Full home, you are available daily | Either; labour saves 7 – 9% in practice |
| Single kitchen or bathroom | Labour contract is reasonable |
| Painting or flooring only | Labour contract |
| Occupied renovation with society constraints | Turnkey |
| You are abroad or out of the city | Turnkey, without question |
| You have a strong supplier network | Labour contract |
The honest summary: the saving on a labour contract is smaller than the headline suggests once wastage and shortfall purchases are counted, and it is paid for in your own time. If you have the time and the network, take it. If you do not, turnkey is not a premium for convenience; it is a transfer of risk that you would otherwise carry badly.
Frequently asked questions
How much does a labour contract really save?+
Headline rates suggest 12–20%; in practice we see 7–9% once wastage, shortfall purchases, storage and transport are counted. If your own time has any value, the gap narrows further. It is still a real saving for someone able to manage procurement properly.
Who is responsible for a defect under a labour contract?+
That is the central weakness. A failed shutter becomes an argument about whether the board you bought was inadequate or the workmanship was. Under turnkey one party owns both. Keep material invoices and specification records to narrow the argument if you go labour-only.
Is GST different between the two?+
Yes, and it should be modelled before deciding. Under turnkey the tax applies to the whole works contract; under a labour contract the labour and the materials are taxed separately at their own rates. The net effect varies with the material mix, so ask for both quotations inclusive of tax.
Can I do labour contract for part of the work?+
Yes, and it is common — turnkey for the joinery and a labour contract for painting, for example. Keep the interfaces clean: one trade, one scope, one party. Splitting a single trade between two arrangements is where disputes start.
What is the biggest risk people underestimate?+
Time. Sixty site visits over three months, deliveries received during society hours, and decisions required within the hour. Clients who can do that save real money; clients who assume they can and then cannot end up paying for idle labour.