Development feasibility: establishing the construction-cost budget
A feasibility appraisal needs a construction-cost allowance that matches the proposed development, its site and its delivery programme.
by Jack Butler-Kettle · About 4 min readShare
Before you start
Gather the site plan, accommodation schedule, design brief, surveys, planning position and programme. Record the appraisal date and option being tested.
Construction cost is one input to development feasibility. Land value, sales or rental assumptions, finance, tax and planning obligations need their own evidence and appropriate advisers.
This guide explains the cost-planning contribution. It does not provide a residual land valuation, investment recommendation or lending assessment.
Step-by-step guide
1. Define the development option
Record the unit mix, areas, specification, tenure assumptions and common facilities. Separate saleable areas from the area used to estimate construction cost.
Include access, parking, landscaping and shared infrastructure. A dwelling-only rate multiplied by unit count may omit substantial site costs.
Keep different development options separately versioned so changes in area and scope remain traceable.
2. Investigate site-specific costs
Identify demolition, ground treatment, retaining works, drainage, utilities and access constraints. Ask specialists to investigate material uncertainties.
Obtain quotations or reasoned allowances for major infrastructure. Record scope boundaries with utility providers and neighbouring owners where relevant.
A cheap plot can still be expensive to develop. Have legal and planning advisers assess constraints outside the QS cost scope.
3. Prepare a consistent cost build-up
Separate building work, external work, preliminaries, professional costs and risk. State the pricing date, procurement assumptions, inflation treatment and tax basis.
Use the RICS New Rules of Measurement as a recognised cost-planning framework, adapted to the purpose of the estimate.
Our Development cost estimating and planning can provide this cost input. The wider appraisal must still reconcile separately sourced non-construction inputs.
4. Test phasing and cash timing
Identify shared works needed before any unit completes. Split one-off infrastructure from costs repeated for each phase.
Check mobilisation, temporary access, site-running costs and the effect of delayed starts. Avoid dividing every cost evenly between units when expenditure occurs earlier.
Pass the dated cost profile to the person preparing finance and sales assumptions. A profitable-looking total does not establish sufficient cash at every stage.
5. Test sensitivities and record the decision
Show how cost, programme and other material assumptions affect the appraisal. The appointed advisers should test value and finance assumptions as well as construction cost.
Use evidence-based scenarios; label any percentage chosen only to illustrate sensitivity. Keep the base case unchanged for comparison.
Record the investigations and approvals needed before proceeding. Revisit the cost plan when design, planning conditions or tender returns change.
Before you finish: Check the source and owner of every appraisal input. Identify unresolved assumptions and test combined downside effects before a commitment.
Worked example
The facts
A fictional option has an £800,000 building allowance and £150,000 of site infrastructure, before other appraisal costs.
What happens
The construction subtotal is £950,000. The shared infrastructure is not counted again within each plot allowance.
An illustrative 10% increase in the building element adds £80,000, producing £1,030,000 for these two headings.
The wider appraisal tests that change alongside its separately evidenced programme, finance and value assumptions.
What this shows
This is a construction-cost sensitivity, not a development profit calculation or a recommendation to buy the site.
Development cost appraisal
Replace the invented assumptions with professional project evidence. Include land, fees, finance, sales costs and tax consistently; test timing and downside cases separately.
Free blank template for your own project. The completed example is shown below. No email address required.
View the completed example
Completed fictional example
Westhaven refurbishment · 14 October 2026 · Version 1.0
Development cost appraisal
Scroll across if needed to read the whole record. A dash means no value has been entered.
| Scenario | Completed value (£) | Land (£) | Construction (£) | Fees / risk (£) | Finance / sales / tax (£) | Indicative surplus (£) | Basis |
|---|---|---|---|---|---|---|---|
| Base teaching case | £900,000.00 | £200,000.00 | £450,000.00 | £70,000.00 | £60,000.00 | £120,000.00 | All project costs entered on consistent VAT basis; no benchmark claim |
| Construction downside | £900,000.00 | £200,000.00 | £495,000.00 | £70,000.00 | £60,000.00 | £75,000.00 | Construction cost 10% higher; other assumptions held fixed |
The example surplus falls from £120,000 to £75,000. This simple appraisal does not model discounted returns, borrowing drawdowns or market value; those need separate analysis.