Build-Cost Index Passthrough is a contractual mechanism commonly used in property development finance UK, enabling the adjustment of development budgets, loan amounts, or project valuations according to changes in recognised construction cost indices. It ensures that financing reflects real-world fluctuations in material and labour costs, protecting both lenders and developers from unexpected inflation in building expenses. Typically referenced in loan agreements or development agreements, this adjustment allows property developers to maintain project viability and lenders to safeguard security, while providing a transparent method of linking financial terms to prevailing market construction trends.
This sits beneath Market Linkages, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Land Value Sensitivity to GDV -x%, as both are closely related measures used to assess similar aspects of performance or risk.
View glossary entry