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Land development

Building new homes or commercial space and selling or holding them.

beginnerprofessional

Professional analysis

Appraise with residual or profit-on-cost methods, sensitivity on GDV and build cost, and finance cost over the programme. Development finance typically requires experience, a contractor with warranties, and monitoring surveyors. Consider VAT (new residential is zero-rated for the developer), CIL, s106 and new building safety rules.

Capital requirements

Equity of 10–35% of costs is common; mezzanine or JV equity can fill gaps at a cost.

Cost assumptions to budget for

  • Build cost and contingency
  • Professional fees
  • Finance and fees
  • s106/CIL, BNG
  • Sales and marketing
  • Warranties (e.g. new-home warranty)

Potential returns

Target profit on GDV is a risk buffer, not a guarantee.

Main risks

  • Cost inflation
  • Contractor failure
  • Sales values falling
  • Planning conditions
  • Programme delays increasing finance costs

Legal checks

  • Building contract
  • Planning conditions discharge
  • Rights to light and party walls

Regulatory checks

  • Building regulations and new-home warranty
  • Building safety regime for higher-risk buildings

Is it suitable?

Often suits

  • Experienced developers or JV with one

Usually not suitable for

  • First projects without experienced partners

A general guide, not a personal recommendation. Suitability depends on your finances, experience and attitude to risk.

Step-by-step

  1. Residual appraisal with sensitivity.
  2. Secure planning.
  3. Tender build; appoint professionals.
  4. Arrange development finance.
  5. Build, monitor costs.
  6. Sell or refinance to hold.

Financial calculations

Total sale value of the finished units — use sold evidence.

Get a cost consultant or contractor estimate.

SDLT, legal and agent fees on the land.

Development appraisal (residual land value)

Build cost£855,000
Professional fees£85,500
Contingency£64,125
Sales costs£30,000
Build finance (approx.)£52,743
Target profit£240,000
Residual before land costs−£167,368
Maximum land price£0
Land costs and finance£0
  • ⚠ The scheme does not reach the target profit at any land price with these inputs.
  • ⚠ A simplified appraisal. Lenders and valuers use full cashflow appraisals; planning permission is not assumed.

Every figure above comes from the assumptions you entered. This is not a valuation, mortgage offer or financial advice.

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Official sources

Last reviewed 31 Oct 2026. Rules change — check the source before relying on this guide.

Not advice

This guide is general research. It is not legal, tax, financial, planning or investment advice. Speak to a qualified, regulated professional before acting.