In UK property development finance, this ratio measures the total borrowing costs—including interest, arrangement fees, and other finance-related charges—as a percentage of the overall project expenditure. It provides small and medium-sized developers, as well as industry professionals, with a vital metric to understand the financial burden associated with funding a project. By calculating this ratio, developers can better evaluate the viability of their developments, ensuring that finance costs are appropriately managed and do not diminish the anticipated profitability. This insight is key to making informed decisions and optimising the capital structure for successful property development.
This sits beneath Blended Financing Costs, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Incremental Cost of Capital, as both are closely related measures used to assess similar aspects of performance or risk.
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