Glossary definition
Profit on Cost
A measure of development profitability calculated by dividing the projected profit by the total development costs and expressing it as a percentage. Lenders typically require a minimum profit on cost of 20% to 25% for residential development schemes to ensure adequate margin for error.
Definition
A measure of development profitability calculated by dividing the projected profit by the total development costs and expressing it as a percentage. Lenders typically require a minimum profit on cost of 20% to 25% for residential development schemes to ensure adequate margin for error. It is a key viability metric that lenders assess alongside LTGDV when deciding whether to approve a facility.
See also
Closely related terms.
Gross Development Value
The total market value of a development upon completion, encompassing all units and any commercial elements.
Build Cost
The total cost of construction works on a development project, typically including materials, labour, preliminaries, and contractor margins.
Residual Land Value
The value of a development site calculated by taking the gross development value of the completed scheme and deducting all development costs including build costs, professional fees, finance costs, and developer profit.
Further reading
Guides that touch this term.
Guide
How Does Development Finance Work? A Complete Guide for UK Developers
A ground-up guide to how development finance is structured in the UK, covering loan mechanics, drawdown schedules, monitoring surveyors, and what lenders look for in your application.
5 min read readReadGuide
RICS Red Book Valuations for Development: What Lenders Require
A comprehensive guide to RICS Red Book valuations in development finance, covering what lenders require, how valuations are structured, and how to ensure your scheme is accurately assessed.
11 min read readReadGuide
The Capital Stack in Property Development: How to Structure Your Funding
A comprehensive guide to understanding and structuring the capital stack in UK property development, from senior debt through mezzanine to equity contributions.
9 min read readRead
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