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Development Finance

What Is A Development Feasibility Study?

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Quick answer

A good feasibility study tests

3 core 8+ areas

Including cost, revenue, margin and risk

  • Typical lender target margin 15-20%+
  • Main purpose Viability testing
  • Core outputs Costs, revenue, profit
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A development feasibility study is a detailed financial and commercial assessment used to test whether a proposed project is worth pursuing and financeable.

It brings together projected costs, likely sale values or end value, timing, finance exposure, contingency allowances and developer profit so lenders can judge whether the deal stacks up.

Rather than relying on the site alone, lenders use the feasibility study to see how the project works on paper before they commit funds in the real world.

What does a feasibility study include?

A development feasibility study is not just a simple spreadsheet. It is a structured review of the numbers, the site, the approvals pathway and the likely commercial outcome of the project.

The purpose is to test whether the proposed development can cover all costs, meet lender requirements and still leave enough profit to justify the risk.

Typical feasibility inputs include:

  • iconSite purchase price or land value
  • iconConstruction and civil costs
  • iconConsultant, council and approval costs
  • iconFinance, holding and interest costs
  • iconSelling, marketing and GST related allowances
  • iconProjected gross realisation value and profit

How A Feasibility Study Works

A feasibility study works by modelling the project from acquisition through to completion and exit.

It estimates the full capital requirement, tests likely revenue, and shows whether the development can absorb overruns or softer sales while still remaining viable.

A typical feasibility process may include:

  • 01 Site analysis
  • →
  • 02 Cost estimate
  • →
  • 03 Revenue forecast
  • →
  • 04 Finance modelling
  • →
  • 05 Sensitivity testing
  • →
  • 06 Margin review

If the numbers remain strong after realistic contingencies and finance costs are included, the study becomes a key part of the lender submission.

What Lenders Look For In The Feasibility

A lender will usually focus on whether the study is complete, realistic and conservative enough to support the debt.

Check 01

Does the project make enough profit?

Lenders usually want to see a healthy margin on cost so the project has room for delays, valuation movement and cost overruns.

Check 02

Are the assumptions believable?

End values, build costs, timing and presales must line up with current market evidence and the project location.

Typical target margin 15–20%+
  • Conservative cost and revenue inputs matter
  • Contingency and finance costs should not be ignored

A weak feasibility is one of the most common reasons development applications fail because lenders treat it as the core proof that the deal is commercially viable.

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Key Items In A Development Feasibility Study

A proper feasibility should capture all of the major numbers that affect project performance.

Missing even one line item can make a project appear better on paper than it really is.

A feasibility typically includes

  • iconLand purchase cost and acquisition expenses
  • iconConstruction, demolition and site works
  • iconProfessional fees including architect, engineer and planner
  • iconCouncil contributions, statutory costs and approvals
  • iconInterest, line fees, holding costs and contingency
  • iconMarketing costs, selling fees and GST treatment
  • iconProjected gross realisation value or end value
  • iconNet developer profit and margin on cost
15 - 20 %
Many lenders want to see a projected profit margin around 15 percent to 20 percent or higher after full costs, finance and contingencies are included. That is why the feasibility study is so important.

Why The Feasibility Matters

The feasibility study often becomes the main reference point for brokers, valuers and lenders when a deal is being assessed.

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Before you buy

It helps identify whether the site is worth securing before too much capital is committed.

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Before you borrow

It gives lenders a structured picture of risk, funding need, exit strategy and profit buffer.

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Before you build

It helps you test timing, cash flow pressure and sensitivity to cost overruns or lower end values.

Common problems

A feasibility study is only useful if the assumptions are realistic. Lenders quickly identify weak or incomplete studies.

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Missing Costs

If finance costs, consultant fees, GST, selling fees or contingency are missing, the projected profit may be misleading

Possible solutions include:
  • icon Add every project cost line item
  • icon Use current quotes and evidence where possible
  • icon Stress test overruns and delays
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Overstated End Values

A project can look profitable if expected sale prices are too optimistic for the market

More reliable approaches include:
  • icon Use recent comparable sales
  • icon Allow for product discounts and incentives
  • icon Ask whether the stock will sell at the forecast rate
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Weak Contingency Allowance

Low contingencies can make a feasibility look cleaner than the real project outcome

Most lenders want to see sensible allowances for construction risk, approvals risk and time risk.
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Poor Timing Assumptions

Construction length, approval timing and selling period can materially change interest and holding costs

Good practice may include:
  • icon Build in realistic programme durations
  • icon Allow for valuation and settlement timing
  • icon Check whether the exit timing is still workable if the project runs late
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How To Prepare A Feasibility Study

Step

01

Confirm the site, concept and likely planning position

Step

02

Collect realistic cost inputs from builders, consultants and authorities

Step

03

Estimate revenue based on comparable sales, end values or rental evidence

Step

04

Add finance costs, contingencies, holding costs and selling costs

Step

05

Review the projected margin and test downside scenarios

Step

06

Use the finished feasibility as part of your funding submission

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