Reltic Independent Commercial Advisory
020 3576 2851 Contact
Services
Cost planning and estimating Quantities and take-off Tendering and procurement Cost control and variations Final accounts and disputes Development monitoring surveying Employer’s agent Client side quantity surveyor
Project types
Residential development Mixed use and regeneration Refurbishment and reuse Complex phasing High-end and prime residential Commercially contentious
Who we work with
Borrower side Lender side
Projects Scenarios Insights Process About
Contact 020 3576 2851

Reference

Development appraisal, term by term

twenty terms a developer uses to price a site, each written twice, once in the trade’s language and once in plain English, and each followed by the cost consequence that comes with it.

Talk to us about a scheme Read the insights

Why this exists

One side of the appraisal is tested weekly. The other is not.

A development appraisal has two large numbers in it. Gross development value is checked against comparable sales more or less continuously, because that data is public and everybody looks at it. Build cost is usually a single rate carried across from the last scheme, and it carries no date.

That asymmetry is where most of the trouble starts, because residual land value sits at the bottom of the subtraction and absorbs the error in every line above it. An eight per cent movement in build cost can take a third of the land budget with it.

The glossary below is written for developers, investors and funders rather than for other surveyors. It is also the vocabulary a developer quantity surveyor has to be fluent in to be of any use before a site is bought, because the cost advice only lands if it is given in the language the appraisal is written in.

Every figure here is illustrative, chosen to show the mechanism rather than to quote a market rate. Where a term leads somewhere we have written about at greater length, there is a link.

Contents

Twenty terms, five groups.

The appraisal

The sheet a site lives or dies on, line by line.

GDV Development appraisal Residual land value Build cost Comparables Underwrite Worst case inputs Profit on GDV

The exit

How the money comes back, and what that changes.

Build and sell Build and hold

The money

Who is funding it, and who is checking the cost.

Cash buyer Development finance Receivership

The land market

Buying, losing, and waiting for the numbers to work.

Outbid Development site Portfolio Keep the network warm When the maths works

The contract

Where cost hides once a builder is involved.

PQS MCD

The appraisal

The sheet a site lives or dies on, line by line.

GDV Gross Development Value

What the finished scheme is worth on completion, before anything is deducted.

In the trade

On a build and sell scheme it is the sum of the unit sale prices. On build and hold it is usually the investment value of the completed, let building. Every other figure in a development appraisal is subtracted from it, which is why it is the first number anyone establishes.

In plain terms

What it will be worth when it is finished. Nothing else. You do not start from what the land costs, you start from what you will get at the end and work backwards.

Worked example

Eight flats at £425,000 each gives a GDV of £3,400,000. Build the same eight to rent and GDV becomes the valuation of the block as an income asset, which is a different number entirely.

Where the cost sitsWhen a developer says "a £5m project" they almost always mean GDV, not build cost. The two are routinely a factor of two apart. Worth establishing which one is on the table before anyone quotes a fee against it.

Development appraisal

The sheet on which a developer tests whether a site works.

In the trade

GDV less build cost, professional fees, finance, planning obligations under section 106 or CIL, sale costs and required profit. Whatever survives that subtraction is the most that can be paid for the land.

In plain terms

One page where you take everything you have to spend away from what the finished building is worth. Whatever is left is what you can pay for the ground.

Worked example

GDV £3,400,000, less build cost £1,900,000, less fees, finance and sale costs £340,000, less required profit £680,000, leaves £480,000 for the land. If the seller wants £700,000 the deal does not work.

Where the cost sitsBuild cost is one cell on that sheet. On the same scheme it is three hundred priced lines. That gap is where cost planning and estimating earns its fee, because the single cell is the least tested number on the page.

Residual land value

What is left for the land once everything else has been taken out.

In the trade

The output of the appraisal, and the most a developer can pay for a site while still meeting the required return. It sits at the bottom of the subtraction, so it absorbs the error in every line above it.

In plain terms

The price above which the site stops being worth buying. It does not come from valuing the land. It comes from working out what can be built on it and what that will sell for.

Worked example

On the appraisal above, £480,000 is left for the land. Raise build cost by 8 per cent, or £152,000, and the residual falls to £328,000. An eight per cent movement in cost has taken a third of the land budget.

Where the cost sitsThis is the mechanism by which an out of date build cost rate kills good sites and lets bad ones through. A rate that has been tested against the current market is worth more than a rate that is merely cautious.

Build cost

The cost of physically building the scheme, excluding land, finance and profit.

In the trade

In most appraisals it is a single rate per square metre or per unit, carried across from the previous scheme. Unlike GDV, which is tested against comparable sales continuously, it is rarely retested and it carries no visible date.

In plain terms

What the builder will charge to put it up. The one large figure in the calculation that a developer does not see quoted somewhere every week, which is why it ages quietly.

Worked example

A rate of £2,100 per square metre set two years ago. Today’s tenders return £2,320. Across 820 square metres that is £180,400, more than half the land budget in the example above.

Where the cost sitsAn out of date rate is not conservative, it is simply wrong in whichever direction the market moved. We wrote about why the rate itself is the weak link in why a cost per square metre fails at tender, and about carrying it forward in construction inflation allowances.

Comparables comps

Achieved prices for similar properties nearby.

In the trade

The basis for GDV. The data is public, held in the land registry and with agents, which is why the value side of an appraisal is checked almost continuously.

In plain terms

What the neighbours sold for. That is how you know what yours will fetch.

Worked example

Three two bedroom flats sold within 400 metres in the last six months at £410,000, £425,000 and £430,000. The appraisal carries £420,000 a unit.

Where the cost sitsThe asymmetry is the whole point of this page. One side of the appraisal is checked every week against public data. The other is carried forward from a scheme that finished two years ago.

Underwrite underwriting

The fixed assumptions a developer prices every deal against.

In the trade

A private risk standard rather than a regulated one. It covers required profit, sales assumptions and buffers. "The numbers we underwrite to have not moved" means the thresholds were not quietly lowered in order to get something bought.

In plain terms

House rules. Below these numbers I do not buy, however good the site looks and however pleasant the seller is.

Worked example

Minimum 20 per cent profit on GDV, sale prices taken 5 per cent below the latest comparables, and a nine month sales period rather than six.

Where the cost sitsWhere a scheme fails on cost rather than on value, the answer is a tested cost plan rather than a relaxed threshold. Moving the threshold is how a portfolio ends up carrying exactly the risk it priced out.

Worst case inputs

Running the appraisal on pessimistic assumptions rather than central ones.

In the trade

Lower sale prices, a longer sales period, higher cost and a longer finance period. A scheme that still works on those inputs has room for the things that go wrong, because something always does.

In plain terms

Assume everything disappoints a little. If it still shows a profit, it is a project rather than a hope.

Worked example

£400,000 a unit instead of £425,000, and twelve months of sales instead of six. GDV falls to £3,200,000, finance costs rise, and only then do you look at what profit is left.

Where the cost sitsThis is the same exercise as a risk allowance in a cost plan, run from the other side of the table. Both fail in the same way, by being set as a round percentage instead of against identified events. More on that in setting a construction contingency.

Profit on GDV and profit on cost

Required profit expressed as a percentage of the finished value.

In the trade

Twenty per cent on build and sell and twenty five on build and hold are common thresholds. The higher figure on a hold reflects capital tied up longer and the risk in the exit valuation. Profit on GDV and profit on cost are different measures and produce different numbers on the same scheme.

In plain terms

How much is wanted, measured against the end value. It is not the same as a margin on cost, and the margin on cost always looks the bigger of the two.

Worked example

GDV £3,400,000, total cost £2,720,000, profit £680,000. That is 20 per cent on GDV and 25 per cent on cost. One transaction, two numbers, both correct.

Where the cost sitsBefore commenting on anyone’s margin, establish which base it is measured against. Otherwise two people are discussing different figures and agreeing about neither.

The exit

How the money comes back, and what that changes.

Build and sell build to sell

Build it, sell it, recover the capital on completion.

In the trade

A shorter capital cycle, with the outcome tied to the sales market at practical completion rather than across a hold period. The exposure concentrates in the sales window.

In plain terms

Put it up, sell it, take the money to the next site.

Worked example

Eight flats sold within seven months of completion. Capital returns roughly two years after the land was bought.

Where the cost sitsBecause the exposure sits in a narrow window after completion, a delay costs twice: interest for longer, and a sales window that has moved. Programme and cost are one conversation here, not two. That is the territory of cost control and variations.

Build and hold build to rent, BTR

Build it, let it, keep it.

In the trade

Capital stays committed and the outcome depends on rental income and the yield applied at valuation, which is why the required return is higher than on a sale. It usually ends in a refinance of the completed, let asset rather than in a series of sales.

In plain terms

Put it up and keep it, so it earns every month. The money comes back more slowly, so you want more of it.

Worked example

The same eight flats let at £1,450 a month, £139,200 a year. The block is then valued as an income asset rather than as eight separate sales.

Where the cost sitsDefects come back to the owner for the next twenty years rather than to a buyer at completion. Retention, the defects period and the final account carry different weight on a hold than on a sale. See defects liability and retention release.

The money

Who is funding it, and who is checking the cost.

Cash buyer

A buyer using their own funds, with no lending on the purchase.

In the trade

No finance condition in the offer, no wait for credit approval and no interest running before the site starts. The price offered is usually lower than a leveraged buyer’s, because what is being sold is certainty and speed rather than the highest number in the room.

In plain terms

Paying with their own money. That is why they close quickly and why they offer less than someone who has to convince a bank first.

Worked example

Two offers on one site. £700,000 subject to finance with twelve weeks to satisfy conditions, or £640,000 in cash completing in four. The seller takes the second, because the first can still fall apart.

Where the cost sitsNo lender also means no monitoring surveyor. Nobody is independently testing the cost position, so a cash buyer has less scrutiny over their own numbers than a borrower does, not more. Several of our hidden cost exposure instructions start there.

Development finance

Short term lending drawn down in stages as the works proceed.

In the trade

Expensive, because it is short and secured against an asset that does not yet exist. Funds are released against verified progress, and the lender appoints a monitoring surveyor to certify that progress before each drawdown.

In plain terms

A building loan paid out in pieces, each released only once the lender can see that something has actually been built.

Worked example

A facility of £1,900,000 over eighteen months, with interest and fees of roughly £210,000. That figure enters the appraisal as its own line, before any profit is calculated.

Where the cost sitsThe monitoring surveyor on that facility acts for the lender, not for the borrower. We explain the role in what a monitoring surveyor does and the boundary in independent monitoring. On the lender side that work is development monitoring surveying.

Receivership

A lender taking control of an asset in order to recover its debt.

In the trade

Triggered when a scheme stops servicing its borrowing or breaches the facility terms. The asset is then sold under time pressure, which rarely achieves full value for anyone.

In plain terms

The bank steps in because the money stopped coming back. It usually sells quickly and cheaply, to recover its own position rather than yours.

Worked example

A site bought 20 per cent above what the numbers supported, on debt, with sales slower than assumed. Interest accrued and the lender took the scheme before completion.

Where the cost sitsThese almost never begin on site. They begin with a land price set against a build cost that was never tested, two years before anybody noticed.

The land market

Buying, losing, and waiting for the numbers to work.

Outbid

Beaten on price for a site.

In the trade

On land, losing does not always mean a worse process. More often it means the winning bidder had looser assumptions, cheaper capital, or a different appetite for risk.

In plain terms

Someone paid more and took the site. It does not follow that they made the better deal.

Worked example

Twelve months without a purchase, losing by around 20 per cent on average. A share of those buyers appear in receivership later.

Where the cost sitsA buyer with a tested build cost loses more bids and fewer schemes. The discipline that costs you sites in a hot market is the same discipline that keeps you solvent in a slow one.

Development site

Land with development potential, with or without planning consent.

In the trade

A site with implementable planning permission prices differently from one with potential alone. Without consent the buyer takes the planning risk and pays accordingly.

In plain terms

Ground you can build on. With the paperwork it costs more, without it less, but then the planning risk is yours.

Worked example

The same site at £640,000 without consent and £900,000 with permission for eight units.

Where the cost sitsThe gap between those two prices is a planning risk that everybody measures. The cost risk sitting behind the consented scheme is usually not measured at all. Ground conditions, services and abnormals are dealt with in pricing site abnormals before purchase.

Portfolio

Several properties bought together from one seller.

In the trade

Usually from a landlord leaving the market. Bought at a discount for scale and speed, but it requires one decision across assets in materially different physical condition.

In plain terms

Buying several properties at once from one owner. Cheaper per unit, but not every unit is equally good.

Worked example

Four blocks of six flats from one owner, 12 per cent below the price of buying them individually, but two of the blocks need a full refurbishment.

Where the cost sitsThe discount is a single number and the refurbishment cost is four separate ones. A portfolio priced as one asset tends to hide its worst building until somebody measures it.

Keep the network warm

Staying in contact with the market during a period of not buying.

In the trade

Agents, sourcers and sellers call the people they remember. Twelve months of silence costs a place in the queue, even when the decision not to buy was the correct one.

In plain terms

You are not buying, but you still take the calls and buy the coffee, so that when the right site appears yours is the first number dialled.

Worked example

Nothing bought in a year, but contact kept with six agents, so the first call about a new site still comes to you.

When the maths works

The point at which land price, GDV and build cost fall back inside the profit thresholds.

In the trade

Not a technical term but a shorthand. It describes the moment the land market falls far enough for an unchanged appraisal to produce a positive result.

In plain terms

When the numbers add up again. Either sellers come down, or values go up.

Worked example

A site at £700,000 does not work against those thresholds. At £480,000 the same site is buyable, with nothing else changed.

Where the cost sitsThe maths also works sooner when the build cost is accurate rather than padded. An inflated allowance rejects good sites just as effectively as a stale one lets bad ones through.

The contract

Where cost hides once a builder is involved.

PQS professional quantity surveyor, the consultancy side

The quantity surveyor acting for the client rather than for the contractor.

In the trade

Professional quantity surveyor, often described as the consultancy side or the client side, as distinct from a contractor’s quantity surveyor who prices and defends the builder’s account. The PQS prepares the cost plan, measures the works, tests the tenders and values what has actually been built. Both roles use the same measurement standards and sit on opposite sides of every valuation.

In plain terms

Your surveyor, not theirs. The contractor has one too, and their job is to maximise what the contractor is paid, which is precisely what yours is there to test.

Worked example

On a £4m scheme the contractor’s surveyor submits a valuation of £820,000 for the month. The PQS measures what is in place, checks it against the contract and certifies £742,000. That difference is not a dispute, it is the process working as intended.

Where the cost sitsDevelopers often assume the contractor’s surveyor is a neutral technician. They are not, and they are not paid to be. Reltic works on the consultancy side only, for one side of a project at a time, which is what cost control and variations covers month by month and what reading a borrower’s cost plan looks like from the funding side.

MCD Main Contractor’s Discount

A discount added to the price before it is deducted.

In the trade

A subcontract clause rather than a main contract one. It was intended to encourage prompt payment down the chain: pay on time, retain the percentage. Two and a half per cent is standard, expressed as one thirty ninth of the subcontractor’s tender and added to it before the main contractor prices the work to the client. It has largely been removed from the standard forms but still appears in bespoke contracts, where it often has no remaining link to payment timing and functions as a management fee.

In plain terms

A discount that is not a discount. The contractor raises the subcontractor’s price by exactly the amount they are about to take back out of it. The subcontractor is paid in full, you pay more, and the paperwork records that you received a reduction.

Worked example

A subcontractor wants £100,000. Add one thirty ninth and the client sees £102,564. The main contractor pays on time and retains 2.5 per cent of £102,564, which is £2,564. The subcontractor receives £100,000. The discount cost nobody except the client.

Where the cost sitsIt is not a line in a cost plan, it is spread across the pricing schedule. On a £4m scheme where 70 per cent of the value passes through subcontractors it is of the order of £70,000. Finding it is tendering and procurement work, and it is why tender documentation gaps cost more than they look like they should. Note the abbreviation is ambiguous: in property finance MCD can mean the Mortgage Credit Directive.

Where we come in

The cost side of that sheet, tested.

Most of the terms above belong to the developer. One of them does not. Build cost is the number we are instructed to establish, and it is the number that decides whether the rest of the appraisal is arithmetic or guesswork.

That is what a quantity surveyor for developers is actually for. Not paperwork after the contract is signed, but a cost figure you can put into a residual land valuation and defend to a funder, produced early enough to change what you bid. Reltic is an independent construction cost consultant working across the United Kingdom, with no design fees, no contractor relationships and nothing to sell you besides the measurement.

That work runs from a first cost plan and estimate before the land is committed, through measured quantities a contractor cannot argue with, into cost control once the scheme is live. Where a lender is funding it, the same discipline is applied from the other side as development monitoring surveying. We act for one side of a project only, and never for a lender and a developer on the same scheme.

If you want to see what goes wrong when the cost side is assumed rather than measured, the quantity assumption and hidden cost exposure scenarios are the closest to what this page describes.

er class="footer">

Get in touch

Talk to us before the decision is made.

Tell us what the scheme is, where it has reached and what is currently uncertain. If it is not work we should take, we will say so and point you somewhere sensible.

Start a conversation
Email office@reltic.co.uk
Telephone 020 3576 2851
Reltic
One side per project

We act for developers, investors and funders. Never for a lender and a developer on the same scheme. The capacity we act in is confirmed before an instruction begins.

Services
Company
Legal
© 2026 Reltic Construction Consultants Ltd, registered in England and Wales, company number 12581120. Registered office Office 676, 60 Tottenham Court Road, London W1T 2EW.