Development margin
Development margin is the project's profit divided by net realisation. It tells you how much of every revenue dollar you keep after building and selling the project.
Formula
Net realisation = GRV minus selling costs and GST.
Why it matters
Development margin is the second most-quoted residential feasibility ratio after profit on cost. ICs and financiers look at both because they capture different things: margin tells you about pricing power, profit on cost tells you about capital efficiency. A project can have a healthy margin but a thin profit on cost if costs run high.
Worked example
Waterloo scheme: profit = $2,087,000, net realisation = $26,200,000.
Development margin = $2,087,000 / $26,200,000 = 8.0%.
For build-to-sell apartments, most developers target 15–20% development margin alongside 18–22% profit on cost.
Questions
Frequently asked
Is development margin the same as profit margin?
Conceptually yes — both are profit divided by revenue. Development margin is the term used in property development; profit margin is the broader term.
Why use both development margin and profit on cost?
They measure different things. A project can hit a 20% margin but only a 12% profit on cost if it's capital-heavy. Both need to clear hurdles to be a real go.
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