Gross Realisation Value (GRV)

Gross Realisation Value refers to a development project’s estimated total sale value once fully completed and sold in the open market. In a nutshell, GRV is the potential revenue a developer expects to earn from selling the finished properties in the project.

How is GRV calculated?

Calculating GRV involves estimating the market value of each unit or property in the development and then adding up these values. This estimate is typically based on current market conditions, which include comparable property sales in the area. Comparable property sales refer to the prices at which similar properties in the same or nearby areas have been sold recently. These sales provide a benchmark for estimating the value of the properties in the development, along with the overall demand for similar properties.

Why is GRV important?

GRV plays a critical role in property development as it helps developers, investors, and lenders understand the potential profitability of a project. Use CRV to assess:

• Feasibility: GRV helps determine whether a project is financially viable by comparing it to the development costs.
• Financing: Lenders use GRV to evaluate the amount of finance they are willing to provide for a project. The higher the GRV, the more confident lenders are in the project’sproject’s potential success.
• Profit margin: Developers can calculate their expected profit by subtracting the total development costs from the GRV.

Factors that affect GRV

Several factors influence the accuracy of GRV estimates, including:

• Market conditions: Fluctuations in the real estate market, including supply and demand, can affect property prices and, consequently, the GRV.
• Location: Properties in desirable locations tend to have higher values, directly impacting the GRV.
• Property type and size: Larger properties or those with unique features may have higher sale values.
• Economic factors: Interest rates, inflation, and overall economic health can influence property values and GRV.

Example of Gross Realisation Value in action

Let’s say a developer is working on a project to build 10 residential units. Each unit is estimated to sell for $800,000 upon completion. The Gross Realisation Value for the project would be:

10 units x $800,000 = $8,000,000

This means the total potential revenue from selling all ten units is $8 million. The developer can then use this GRV estimate to secure financing and evaluate the project’s profitability.

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Financial confidence comes with learning. Explore our Learning Centre and read these helpful links:

• What is a bridging loan?
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Understanding Gross Realisation Value is essential for anyone involved in property development or real estate investment. It helps developers and investors make informed decisions about the financial viability of their projects. At Funding, we offer tailored financial solutions to help you bring your property vision to life. Explore how our building loans can help you achieve your development goals.