Development feasibility
A development feasibility study tests whether a project remains viable when planning capacity, design efficiency, total cost, programme, finance and revenue are assessed together.
At a glance
- Indicative duration
- 3–8 weeks
- The decision
- Does the project remain commercially viable after realistic planning, area, cost, time, funding, tax and revenue assumptions are tested together?
- Documents
- Site plan with the PDM classification and applicable indexes.
- Preliminary volumetric study from the architect.
- Cost plan and cash-flow projection by quarter.
- Tools for this phase
- Development Feasibility CheckDevelopment Cost PlannerPlanning Timeline Estimator
The decision this phase helps you make
Does the project remain commercially viable after realistic planning, area, cost, time, funding, tax and revenue assumptions are tested together?
The feasibility phase should lead to one of the following decisions:
- Proceed — the base case meets the project’s investment criteria and the downside case remains within acceptable risk limits.
- Proceed subject to confirmation — the project may be viable, but specified planning, technical, tax, market or funding assumptions must be confirmed.
- Redesign — the site may support a viable project, but the proposed product, unit mix, area, specification or operating model needs to change.
- Renegotiate — the project may work at a different acquisition price or with different contractual conditions.
- Pause — the available information is insufficient to support a reliable decision.
- Reject — the project does not meet the required return or risk criteria, even after realistic optimisation.
A feasibility model is a decision tool. It is not a valuation, planning confirmation, funding offer or guarantee of future performance.
01Feasibility is more than a spreadsheet
A financial model can calculate any result requested of it. The quality of the answer depends entirely on the quality and internal consistency of the assumptions.
A reliable study connects:
- property and title position;
- planning capacity;
- physical site conditions;
- design;
- area efficiency;
- product and customer;
- programme;
- total development cost;
- acquisition taxes;
- VAT;
- finance;
- revenue;
- sales, leasing or operating period;
- exit.
These elements cannot be modelled independently.
For example:
- a larger gross building area may require more parking, circulation, infrastructure or public-space obligations;
- a higher specification may support a stronger price but also increase cost, procurement time and operating expenditure;
- a longer planning programme increases finance, professional and holding costs;
- a lower purchase price may not compensate for infrastructure, contamination or abnormal construction risk;
- a hotel with a high theoretical gross value may require significant pre-opening expenditure and a longer stabilisation period;
- a residential scheme may have a strong gross development value but poor cash flow if sales are delayed.
The model should expose these relationships rather than hide them behind a single profit figure.
021. Define the feasibility basis
Before modelling the project, record:
- feasibility date;
- model version;
- property and location;
- project type;
- stage of design;
- source of each material assumption;
- currency;
- whether amounts include or exclude VAT;
- area definitions;
- price date;
- cost date;
- assumed inflation;
- programme start date;
- intended exit;
- parties responsible for review.
Every material figure should be classified as:
- Confirmed — supported by a reliable document, quote, decision or other appropriate evidence.
- Adviser estimate — provided by a suitably qualified professional for the relevant purpose and stage.
- Market evidence — derived from identified comparable evidence, with appropriate adjustments.
- Developer assumption — used for modelling but not independently verified.
- Unknown — information not yet available.
Unknown assumptions should not be silently treated as zero.
032. Establish the planning envelope
The planning envelope defines what the model assumes can be developed.
It should consider:
- land classification and qualification;
- permitted or compatible use;
- applicable building parameters;
- site coverage;
- height;
- floors;
- density;
- setbacks;
- parking;
- public-space requirements;
- infrastructure;
- existing buildings;
- allotment or urbanisation requirements;
- restrictions and easements;
- the likely planning procedure;
- external authority involvement;
- any existing prior information, licence, communication or project history.
The feasibility model should distinguish between:
- an area expressly supported by an effective planning decision;
- an area calculated from applicable planning rules;
- an area proposed by the architect;
- an area stated by the seller;
- an aspirational area that depends on a plan change, reclassification, discretion or unresolved interpretation.
These assumptions do not have the same level of certainty.
Planning sensitivity
At a minimum, test what happens if:
- the assumed gross building area falls;
- the permitted use changes;
- parking or infrastructure requirements increase;
- a public-space or land-cession requirement applies;
- part of the property cannot be used;
- external opinions delay the programme;
- the project requires a different procedure from the one initially assumed.
Red flag — the project is only viable at the maximum theoretical area and has no margin for planning reduction or design inefficiency.
043. Build a consistent area schedule
Different area measurements serve different purposes. They should not be mixed.
Depending on the project, the area schedule may include:
- site area;
- developable site area;
- building footprint;
- gross building area;
- above-ground gross building area;
- below-ground area;
- gross private area;
- common areas;
- technical areas;
- circulation;
- balconies and terraces;
- parking;
- storage;
- net saleable area;
- net lettable area;
- hotel room area;
- back-of-house area;
- amenity space;
- external works.
The model should state precisely which area is used for:
- planning;
- construction cost;
- professional fees;
- municipal charges;
- sale price;
- rent;
- operating revenue;
- valuation.
Efficiency
A project’s efficiency is commonly tested by comparing net saleable or lettable area with the relevant gross building area. However, the definition must remain consistent. Areas excluded from one calculation should not be included in another without explanation.
Poor efficiency may result from:
- excessive circulation;
- deep floor plates;
- cores;
- technical areas;
- parking;
- structural constraints;
- heritage retention;
- operator requirements;
- irregular site geometry;
- planning conditions;
- mixed uses.
An unrealistically high efficiency assumption can materially overstate revenue without reducing construction cost.
Red flag — revenue is calculated using gross building area as if every square metre could be sold or leased.
054. Define the product and mix
The feasibility study should identify what is being developed, not just how much area exists.
For residential projects, this may include:
- number of units;
- unit types;
- average areas;
- floor distribution;
- balconies, terraces and gardens;
- parking and storage;
- common facilities;
- specification;
- expected customer.
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For hotels and tourism projects:
- typology;
- category assumption;
- number and type of rooms or units;
- gross and net room areas;
- back-of-house;
- food and beverage;
- amenities;
- operator requirements;
- occupancy;
- average daily rate;
- stabilisation period;
- management or franchise costs.
For income-producing assets:
- net lettable area;
- target rent;
- occupancy;
- rent-free periods;
- incentives;
- operating expenditure;
- stabilised net operating income;
- capitalisation or exit yield.
For land subdivision:
- number and size of plots;
- land cessions;
- urbanisation works;
- infrastructure;
- guarantees;
- phasing;
- plot sales period.
The product should be tested against planning, market demand, cost and operational requirements.
065. Build the total development cost
Total development cost is broader than the land price plus the construction contract. The model should include all material cost categories applicable to the project.
Acquisition
- purchase price;
- IMT;
- stamp duty;
- notarial and registration costs;
- legal and other transaction costs;
- brokerage, where applicable;
- financing of the acquisition;
- costs of satisfying acquisition conditions.
The applicable IMT treatment depends on the nature of the property, use, transaction and acquiring entity. A universal percentage should not be applied to every acquisition.
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Due diligence and investigations
- legal due diligence;
- planning review;
- survey;
- topographic work;
- geotechnical investigation;
- structural assessment;
- environmental investigation;
- contamination testing;
- archaeology;
- utilities and infrastructure studies;
- market study.
Design and professional fees
- architecture;
- engineering;
- planning;
- landscape;
- sustainability;
- project management;
- quantity surveying;
- site supervision;
- legal;
- tax;
- accounting;
- finance;
- specialist consultants.
Planning and municipal costs
- application and procedural fees;
- municipal charges;
- compensation payments;
- infrastructure contributions;
- urbanisation works;
- guarantees;
- occupation or public-domain costs where applicable;
- external authority charges.
These costs vary by municipality, project and procedure and should not be modelled as a single universal percentage where better information is available.
Demolition and remediation
- demolition;
- asbestos or hazardous-material removal;
- contamination remediation;
- waste handling;
- structural stabilisation;
- temporary works;
- protection of neighbouring property.
Construction
- main construction contract;
- preliminaries;
- external works;
- infrastructure;
- landscaping;
- utility connections;
- fit-out;
- furniture, fixtures and equipment;
- specialist installations;
- mock-ups;
- testing and commissioning.
Contingency
Contingency should reflect:
- project stage;
- design development;
- site information;
- procurement route;
- price certainty;
- technical complexity;
- programme;
- identified risks.
A contingency is not a substitute for known costs. A known requirement should be included in the appropriate cost category.
Finance and holding
- arrangement fees;
- interest;
- non-utilisation fees;
- valuation and monitoring;
- legal and security costs;
- hedging where applicable;
- lender technical advisers;
- guarantees;
- account fees;
- property holding costs;
- insurance;
- taxes during the holding period.
Sales, leasing and operation
- marketing;
- sales commissions;
- show units;
- legal sale documents;
- leasing fees;
- tenant incentives;
- operator mobilisation;
- pre-opening;
- recruitment;
- working capital;
- defects and warranty reserve.
Completion and exit
- completion documentation;
- registration and horizontal-property costs;
- lender release;
- final conveyancing;
- transaction advisers;
- exit fees;
- corporate or asset-sale costs;
- tax arising on the chosen exit, subject to professional confirmation.
076. Treat VAT as a project assumption, not a footnote
VAT can materially affect project cash flow and total cost.
The model should distinguish between:
- VAT charged to the project;
- VAT recoverable by the relevant entity;
- VAT that is not recoverable;
- timing of payment and recovery;
- VAT treatment of construction;
- VAT treatment of professional services;
- VAT treatment of sales, leases or operation;
- transitional or project-specific rules.
Do not assume that construction benefits from the reduced VAT rate merely because the property is located in an Área de Reabilitação Urbana.
The application of a reduced rate depends on the legal provisions in force, the nature and contractual form of the works, the project, the applicable urban-rehabilitation framework and, in some cases, transitional requirements. The tax position should be confirmed for the specific project.
VAT cash flow
Even where VAT is expected to be recoverable, the project may need to fund the period between payment and recovery.
This timing should be reflected in:
- peak funding;
- interest;
- equity requirements;
- drawdown schedule.
Red flag — the project is viable only because all VAT has been assumed to be immediately recoverable without tax review.
087. Create a realistic programme
The programme should include more than the construction period.
Depending on the project, model:
- negotiation and exclusivity;
- due diligence;
- acquisition;
- site investigations;
- concept design;
- prior information request;
- planning and design procedure;
- external opinions;
- specialist projects;
- fees and commencement;
- procurement;
- financing;
- construction;
- commissioning;
- completion documents;
- horizontal property;
- pre-sales;
- leasing;
- operator mobilisation;
- handover;
- stabilisation;
- exit.
Activities should be separated into:
- sequential activities;
- activities that can run in parallel;
- decision gates;
- external dependencies;
- float;
- critical path.
The legal decision period should not be treated as the total project period. Preparation, corrections, external consultations, design changes, procurement and funding can materially extend delivery.
Delay sensitivity
Test the impact of:
- three months’ delay;
- six months’ delay;
- twelve months’ delay;
- delayed sales or leasing;
- delayed debt availability;
- delayed utility connections;
- extended construction.
Red flag — the model contains construction costs and revenue but no cost for the time between acquisition and construction.
098. Model finance and equity
The feasibility study should show how the project is funded through time.
Include:
- initial equity;
- shareholder loans;
- investor equity;
- senior debt;
- subordinated or mezzanine finance;
- interest;
- financing fees;
- loan-to-cost or other lender limits;
- drawdown conditions;
- equity-first requirements;
- sales or leasing conditions;
- cost-overrun support;
- repayment;
- refinancing;
- distributions.
The model should calculate:
- monthly or quarterly cash flow;
- debt drawdowns;
- interest;
- peak debt;
- peak equity;
- funding shortfall;
- repayment;
- distribution timing.
Debt should not be treated as a fixed percentage automatically available from the date of acquisition.
Financeability may depend on:
- title;
- planning position;
- equity contribution;
- valuation;
- pre-sales;
- contractor appointment;
- fixed or controlled costs;
- guarantees;
- lender monitoring;
- security documents;
- sponsor support.
Red flag — the project assumes debt is available but does not include financing fees, interest during delay, drawdown conditions or additional equity for cost overruns.
109. Support the revenue assumptions
Revenue should be based on evidence relevant to:
- exact location;
- project type;
- unit or room type;
- area;
- specification;
- views and orientation;
- amenities;
- parking;
- delivery date;
- sales or leasing period;
- condition;
- competing supply.
Asking prices should not automatically be treated as achieved transaction prices.
Adjust comparable evidence for:
- time;
- location;
- product;
- floor;
- view;
- outdoor space;
- parking;
- specification;
- unit size;
- sales incentives;
- taxes included in the advertised price;
- completion stage.
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Residential sales
Model:
- price by unit or unit type;
- reservation and promissory-contract timing;
- deposits;
- completion proceeds;
- cancellations;
- sales commissions;
- sales pace.
Rental projects
Model:
- rent by unit or square metre;
- vacancy;
- incentives;
- operating expenses;
- management;
- stabilisation;
- bad debt;
- capital expenditure.
Hotels and tourism
Model:
- room or unit inventory;
- occupancy;
- average daily rate;
- seasonality;
- food and beverage;
- ancillary revenue;
- operating costs;
- operator, management or franchise fees;
- pre-opening;
- stabilisation;
- replacement reserve.
Asset or project sale
Model:
- expected sale date;
- stabilised income where relevant;
- exit yield or valuation approach;
- transaction costs;
- debt repayment;
- tax and corporate consequences, subject to review.
Red flag — revenue is based on the most expensive competing project without adjustment for location, specification, delivery date or sales pace.
1110. Use coherent scenarios
The model should contain at least three complete scenarios.
Downside case
May include:
- lower planning area;
- lower sale price, rent or room rate;
- slower absorption;
- higher construction cost;
- higher infrastructure cost;
- longer planning;
- longer construction;
- higher interest;
- lower operating performance;
- later exit.
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Base case
Should use the assumptions that are most reasonably supported by the available evidence. It should not be an average of unrelated minimum and maximum values.
Upside case
May include:
- improved design efficiency;
- stronger pricing supported by evidence;
- better procurement;
- shorter programme;
- additional lawful area;
- lower finance cost;
- improved operating performance.
Upside should represent a credible improvement, not an unsupported best case.
Scenario integrity
Each scenario must be internally consistent.
Do not calculate a “profit range” by combining:
- the lowest possible cost;
- the highest possible revenue;
- the shortest programme;
- the lowest finance cost.
That produces an extreme promotional case, not a meaningful development scenario.
1211. Test the key sensitivities
At a minimum, test changes in:
- gross building area;
- net saleable or lettable area;
- area efficiency;
- construction cost;
- infrastructure cost;
- sale price;
- rent;
- occupancy;
- exit yield;
- planning period;
- construction period;
- sales or leasing period;
- interest;
- contingency;
- land price.
The most useful sensitivities are those that show:
- which assumption has the largest effect;
- how much change the project can absorb;
- the break-even point;
- whether the land price is supportable;
- how much additional equity may be required.
A project with a high projected return but extreme sensitivity to one unconfirmed assumption may be less robust than a project with a lower but more reliable return.
13Core feasibility outputs
The report should include:
Planning and area
- site area;
- assumed gross building area;
- above-ground and below-ground area;
- net saleable, lettable or operational area;
- efficiency;
- project mix;
- planning confidence.
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Cost
- acquisition price;
- acquisition costs;
- construction;
- professional fees;
- municipal and infrastructure costs;
- finance;
- VAT;
- contingency;
- marketing and exit;
- total development cost.
Revenue
- gross development value;
- rental or operating income;
- stabilised income;
- exit value;
- sales or leasing programme.
Return
- development profit;
- profit on cost;
- cost-to-value ratio;
- project and equity returns where appropriate;
- break-even price or rent;
- residual land value.
Funding
- peak debt;
- peak equity;
- monthly or quarterly funding requirement;
- interest;
- funding shortfall;
- repayment.
Risk
- downside, base and upside cases;
- sensitivity table;
- material unknowns;
- required confirmations;
- recommendation.
14Residual land value
Residual land value estimates what the project can afford to pay for the land after allowing for:
- development revenue or investment value;
- all development costs;
- finance;
- acquisition costs;
- contingency;
- required developer return.
It is not necessarily the market value of the land. The result depends on the reliability of the area, cost, programme and revenue assumptions.
The model should show:
- residual value before land-acquisition costs;
- acquisition taxes and transaction costs;
- maximum price supported by the relevant return requirement;
- difference between residual value and asking price;
- sensitivity to the main assumptions.
A land price should not be justified by increasing assumed revenue or reducing cost until the model produces the desired answer.
15Documents and evidence
The feasibility file should contain:
- current site-screening report;
- planning note;
- area schedule;
- concept design;
- market evidence;
- cost plan;
- municipal and infrastructure assumptions;
- project programme;
- tax and VAT assumptions;
- funding assumptions;
- cash flow;
- scenario analysis;
- sensitivity table;
- risk register;
- source register;
- decision record.
Each version should be dated and controlled so that outdated assumptions are not reused without review.
Decision gate
Feasibility is complete when the developer can answer:
- What planning and building-area assumptions are being used?
- How confident are those assumptions?
- What is the net saleable, lettable or operational area?
- What is the area efficiency?
- What is included in total development cost?
- How has VAT been treated?
- What is the realistic development programme?
- How much equity is required and when?
- What evidence supports the revenue?
- What happens in the downside case?
- What is the break-even price, rent or project value?
- What residual land value does the project support?
- Which assumptions must be confirmed before acquisition?
- Does the return justify the risk?
If the project only works in the upside case, it is not ready to proceed on that basis.
Red flags at this phase
- The project is only viable at the maximum theoretical area, with no margin for planning reduction.
- Revenue is calculated on gross building area as if every square metre could be sold or leased.
- All VAT is assumed to be immediately recoverable without tax review.
- There is no cost for the time between acquisition and construction.
- Debt is assumed available without fees, interest during delay or cost-overrun equity.
- Revenue relies on the most expensive competing project without adjustment.
- The profit range combines minimum cost with maximum revenue and the shortest programme.
Indicative timing and costs
An initial feasibility study may take approximately three to ten weeks after the core site and planning information is available.
A more detailed study may require:
- developed concept design;
- cost consultant input;
- planning advice;
- market research;
- technical investigations;
- infrastructure enquiries;
- tax advice;
- lender or investor feedback;
- operator input.
There is no standard feasibility cost. The scope should reflect the project’s scale, complexity, stage and capital exposure. A simplified early model may be appropriate for screening, provided its limitations are clear. It should not be presented as a detailed feasibility report.
Common mistakes
- 1Using the seller’s building-area assumption without verification.
- 2Applying sale prices to gross building area.
- 3Ignoring common, technical and circulation areas.
- 4Excluding parking, basements or external works from construction cost.
- 5Treating soft costs as one unsupported percentage.
- 6Omitting municipal fees and infrastructure.
- 7Assuming a universal IMT rate.
- 8Assuming reduced VAT applies because the site is in an ARU.
- 9Treating all VAT as immediately recoverable.
- 10Omitting planning and sales delays.
- 11Assuming debt is available from acquisition.
- 12Excluding interest, finance fees and lender costs.
- 13Using asking prices as completed transaction evidence.
- 14Combining minimum cost with maximum revenue.
- 15Presenting a best case as a profit range.
- 16Using contingency to cover known costs.
- 17Ignoring peak equity.
- 18Treating residual land value as a formal valuation.
- 19Updating one assumption without updating connected assumptions.
- 20Proceeding because the model shows profit without testing downside risk.
Feasibility checklist
Before moving to acquisition, confirm that you have:
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Frequently asked questions
What is the difference between a feasibility study and a valuation?
A feasibility study tests the economics and risk of a proposed development using stated assumptions. A valuation estimates value for a defined purpose and should be prepared by an appropriately qualified professional.
Can I use a standard construction cost per square metre?
It may be used for an early screen if the source, date, area basis, project type, specification and exclusions are clear. It should be replaced by project-specific cost advice as the design develops.
Should construction cost be applied to gross or saleable area?
Construction cost should be applied to the areas and elements to which the cost relates. Applying cost only to saleable area can omit common areas, technical spaces, parking and other constructed elements.
Is profit on cost the same as cash return to investors?
No. Profit on cost compares project profit with total development cost. Investor cash returns also depend on timing, leverage, financing, equity contributions and distribution arrangements.
Can I assume that VAT is recoverable?
Not without confirming the developer’s tax position, the nature of the costs and the intended transactions or activity. Recoverability and timing should be reviewed for the specific project.
How accurate should an early feasibility study be?
It should be accurate enough for its decision purpose and transparent about uncertainty. Early-stage estimates are expected to change, but unsupported precision should be avoided.
When should the model be updated?
Whenever a material assumption changes, including planning area, design, cost, programme, finance, tax, sales evidence or exit strategy.
Tools for this phase
Development Feasibility Check
Build downside, base and upside cases using consistent area, cost, programme, funding and revenue assumptions.
Start feasibility checkDevelopment Cost Planner
Organise acquisition, planning, construction, finance, contingency and exit costs.
Build a cost planPlanning Timeline Estimator
Identify the planning and delivery dependencies that affect programme and finance.
Estimate the timelineNext phase
04 — Land & Project Acquisition
Secure control of the property or project on terms that reflect the remaining title, planning, technical, corporate, funding and delivery risks.
Continue to Land & Project Acquisition
Legal support through VVA
Want the feasibility assumptions reviewed?
VVA can assist with the legal, planning, acquisition, tax-coordination and project-document questions that affect the development model.
Legal services are provided by Valente Veiga & Associados.
Official sources
- Regime Jurídico da Urbanização e da Edificação — Decreto-Lei n.º 555/99, in its current consolidated version.
- Regime Jurídico dos Instrumentos de Gestão Territorial — Decreto-Lei n.º 80/2015, in its current consolidated version.
- Portaria n.º 71-A/2024, of 27 February — documents required for procedures under the RJUE.
- Autoridade Tributária e Aduaneira — current IMT and VAT legislation and published guidance.
- Instituto Nacional de Estatística — official construction-cost indices.
- Applicable municipal plans, regulations and fee schedules.
Last reviewed: 21 August 2026
This page provides general information about property-development feasibility in Portugal. It is not a valuation, funding offer or legal, tax, planning, accounting, engineering or investment opinion. Results depend on the assumptions entered and should be reviewed by appropriately qualified professionals.