The Interest Capitalisation Ratio in property development finance UK refers to the proportion of interest charges added to the outstanding loan balance rather than being serviced during the project. It indicates how much borrowing cost is capitalised within the facility, influencing both loan size and eventual repayment obligations. A higher ratio means greater interest is deferred, potentially improving short-term cash flow but increasing the overall debt burden. Developers and lenders use this ratio to assess cost efficiency, funding structure, and the impact of interest roll-up on project returns and financing viability.
This sits beneath Timing Sensitivity, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Interest Rate Reset Sensitivity, as both are closely related measures used to assess similar aspects of performance or risk.
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