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Valuation method module

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.

method.hypothetical-developmentv3.0.0Either: Insitive-hosted OR in-house API

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.

Inputs
  • scheme : DevelopmentScheme
    Lots / units, GFA, mix and end-product specs.
  • grv : Money
    Gross realisation (sum of end-product values).
  • costs : CostSchedule
    Hard, soft, holding and finance costs.
  • programme : Phasing
    Construction and settlement windows for monthly phasing.
  • profitRisk : Ratio
    Required developer margin (% of net realisation).
Outputs
  • residual : Money
    Indicated land value (residual).
  • feasibility : FeasibilityReport
    Monthly cash flow, phased finance, IRR and sensitivity grid.