Cost overrun bands (+5/+10/+15%) are used in property development finance UK to model potential increases in development costs beyond the original budget. Each band represents a scenario where costs rise by a specific percentage, typically 5%, 10% or 15%, allowing developers and lenders to assess financial risk, stress-test loan structures, and evaluate the impact on profitability and returns. These bands are an essential component of scenario and sensitivity analysis, supporting informed decision-making on contingency funds, budget allocation and capital stack structuring. They are widely applied in feasibility studies, risk modelling and development finance negotiations.
This sits beneath Scenario/Sensitivity Packs, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside 25/50/100 bps Rate Shocks on NPV, as both are closely related measures used to assess similar aspects of performance or risk. In funding terms, Cost Overrun Bands (+5/+10/+15%) is most commonly encountered in connection with Target IRR with Oversight within the property development capital stack.
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