Wednesday, 20 May 2015

Phases of a Feasibility Study

Phases of a Feasibility Study for a Building Development

Initial Definition, Preliminary Planning and Profit Analysis

Financial Feasibility Studies for Property Development: Theory and Practice
Real estate developments are structured in phases that define the life cycle of the building project. Along the life cycle, costs and resources increase progressively until they reach a maximum level and then decrease. Also, the more you advance in the cycle, the probability of success increases and the risks decrease. In large investment projects, the Feasibility Study should be the first phase of the cycle. The approval and acceptance of the Feasibility Study by all parties involved in the development is a prerequisite for the start of any subsequent phases.

Phases of the Feasibility Study

The purpose of the Feasibility Study is to determine the project's profitability and its comparison with other investments with lower risk. Such determination is made by applying certain criteria to monetary flows, which are calculated on the basis of a preliminary planning which, in turn, requires the availability of descriptive data about the final product sought by the building project, structured in an initial definition. Thus, the draft of a feasibility study may be structured into the following phases:
  • initial definition of the final product pursued by the building project
  • preliminary planning of the project
  • profitability analysis.

The Preliminary Planning Phase

The preliminary planning phase includes the following processes:
  • time schedule, with the result of a work program
  • economic planning, with the results of the budget and the curves of revenues and expenses
  • financial planning, which determines project flows from a funding scenario.

In turn, the time schedule of the project includes the following processes:
  • defining activities
  • estimating a time schedule for every activity
  • determining an appropriate order for the implementation of all activities
  • calculating the program.

And the economic planning includes the following processes:
  • planning of resources
  • estimation of costs
  • layout of the costs curve.

The Profitability Analysis Phase

The phase of analysis of the building project's profitability includes the following processes:
  • applying profitability criteria on the flows obtained in the planning phase
  • evaluation of risks impacting on the profitability of the project.

Architectural Report

Daniel Trujillano, Architect
Feasibility Studies for Building Developments

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