Meaning and transaction use
Homes England describes total development costs as including base and abnormal build costs, remediation, infrastructure, professional fees, statutory contributions, marketing and finance. [S1]
UK viability guidance says appraisals should be supported by evidence and should consider value, costs, land value and developer return transparently. [S2]
Proposed control method: use a cost-code dictionary, reconcile budget to contracts and quantity-surveyor reports, distinguish committed from forecast cost, and update contingency, finance and cash timing after each draw.
Worked example
Illustrative appraisal only. Assume GDV of USD 30 million and GDC comprising USD 5 million land, USD 14 million construction, USD 2 million professional and statutory costs, USD 1 million finance, and USD 1 million contingency.
Scroll the table horizontally to view all columns.
| Measure | Calculation | Result |
|---|---|---|
| GDC | 5 + 14 + 2 + 1 + 1 | USD 23 million |
| Development profit | 30 - 23 | USD 7 million |
| Profit on cost | 7 / 23 | 30.4% |
| Profit on GDV | 7 / 30 | 23.3% |
| Profit after USD 2 million cost overrun | 30 - 25 | USD 5 million |
Base profit is USD 7 million before tax under the assumptions. A USD 2 million overrun reduces it to USD 5 million.
Proposed transaction review process
Set the cost convention
Define included land, tax, finance, contingency and return.
Build the budget
Map quantities, contracts, programme, statutory and professional costs.
Time the cash flows
Schedule draws, deposits, retentions, finance and receipts.
Monitor
Reconcile committed, incurred, paid, forecast and contingency balances.
Evidence checklist
Land evidence
Purchase terms, taxes, fees and conditions.
Build evidence
Quantity-surveyor report, contracts, variations and programme.
Other costs
Consultant appointments, approvals, contributions, marketing and insurance.
Finance evidence
Facility terms, draw schedule, interest, fees and hedging.
Decision framework
| Situation | Proposed action |
|---|---|
| A cost is unpriced | Retain an evidenced allowance and downside sensitivity. |
| A variation is approved | Update committed cost, contingency and funding immediately. |
| Delay occurs | Recalculate preliminaries, finance, revenue timing and covenants. |
| GDC definitions differ | Reconcile components before comparing profit or leverage ratios. |
Common errors to check
- Omitting finance or statutory costs.
- Counting contingency twice.
- Comparing profit-on-cost ratios built from different GDC definitions.
- Using an undated cost total for a phased project.
Reconcile the development cost
Bring the land terms, cost plan, programme, facility and contingency schedule to a GDC review. Separate committed, incurred and forecast costs and test overruns and delay.
Discuss the transactionPrimary references and editorial scope
- Homes England: Financial viability for housing-led projects
Development-cost components and residual appraisal. Reference checked 17 September 2026. - GOV.UK: Viability guidance
Evidence, transparency and core viability inputs. Reference checked 17 September 2026.
General development-finance education. Figures are hypothetical. Cost conventions, tax, finance, valuation and viability requirements depend on the project and jurisdiction.
General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.
