The hurdle rate in property development finance UK refers to the minimum internal rate of return (IRR) that investors or lenders require before developers receive profit distributions. It acts as a performance benchmark for the project’s returns. The actual cost of finance, by contrast, is the true weighted average expense of borrowing or equity costs incurred by the developer, including interest rates, fees, and preferred returns. Comparing the hurdle rate to the actual cost of finance helps assess project viability and capital efficiency, ensuring the returns exceed funding costs to justify risk.
This sits beneath IRR Hurdles & Pref Returns, introducing a more specific variant of the measure without changing its core interpretation.
View glossary entry