In UK property development finance, the incremental cost of capital refers to the extra expense incurred when a developer seeks additional funding beyond their existing financing. This cost reflects changes such as higher interest rates, arrangement fees, or altered lending terms attached to the new tranche of capital. Accurately assessing these incremental costs is essential for developers deciding whether to increase their borrowing or equity investment. Understanding this helps ensure that expanding the capital structure remains financially viable and supports the overall success of a property development project.
This sits beneath Blended Financing Costs, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Finance Cost to Total Project Cost, as both are closely related measures used to assess similar aspects of performance or risk.
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