Hypothetical Development
Reverse-engineer the land value from the project: gross realisation less every cost a competent developer would incur, finance modelled month-by-month.
Methodology
Also called the residual method, the hypothetical development approach values a development site by subtracting from the projected gross realisation every cost a competent developer would incur — construction, professional fees, selling costs, finance and a market-required margin for profit and risk. What is left over is the residual that can be paid for the land.
This module runs a time-phased monthly feasibility rather than a single-line residual: construction and professional fees draw down on an S-curve, sales settle over a defined window, and finance is charged on the actual outstanding (drawn) balance each month — including interest on the land draw itself. The residual is solved by iteration, and the same monthly cash flow yields the project IRR, profit on cost and a price/cost sensitivity grid.
The Insitive module orchestrates the feasibility composition: pulling planning permissions and constraints from the cadastre module, gross realisation from the comparable sales module, costs from your build-rate API, and finance from your debt assumptions. The result is a fully transparent residual land value backed by line-item evidence.
When to use it
- Englobo and infill development sites.
- Heritage-listed sites with adaptive re-use potential.
- Sites with a current DA / planning permit where end-product is well-defined.
- Strata subdivision and townhouse-style development.
Standards & references
- IVS 410 — Development Property (IVS 2025).
- IVS 105 — Valuation Approaches and Methods (residual / feasibility under the market and income approaches).
- API Professional Practice 2021 — Australian Property Institute (adopts IVS).
- AASB 102 — Inventories (developer accounting context).
Plugin interface
Every method is a self-contained module that plugs into the Valuation App. It exposes a typed input/output schema so it can be invoked from a report writer, a workflow, or your own backend.
- scheme : DevelopmentSchemeLots / units, GFA, mix and end-product specs.
- grv : MoneyGross realisation (sum of end-product values).
- costs : CostScheduleHard, soft, holding and finance costs.
- programme : PhasingConstruction and settlement windows for monthly phasing.
- profitRisk : RatioRequired developer margin (% of net realisation).
- residual : MoneyIndicated land value (residual).
- feasibility : FeasibilityReportMonthly cash flow, phased finance, IRR and sensitivity grid.