Profit on cost tells you how efficiently you spend. Profit on GDV tells you how much of the finished value you keep. They answer different questions.
GDV stands for Gross Development Value. It is what the finished project is worth when you sell or refinance. Profit on GDV divides your net profit by the GDV and multiplies by 100. It answers: for every pound of finished value I create, how much is mine?
The industry target is 20% minimum. A 20% profit on GDV means for every £1 million of finished development, you keep £200,000 in profit. On a £5 million scheme, that is £1 million profit.
Here is the difference between profit on cost and profit on GDV. A development might have a 25% profit on cost but only 15% profit on GDV because costs are high relative to GDV. Lenders look at both. If profit on GDV is below 15%, the project is tight.
You develop a small block of four flats in Portsmouth. Total costs: £600,000. Expected GDV: £800,000. Net profit: £200,000. Profit on cost: 33%. Profit on GDV: 25%. Both strong.
Now costs run to £700,000 and GDV drops to £780,000 because the market softens. Net profit: £80,000. Profit on cost: 11.4%. Profit on GDV: 10.3%. The project is underwater.
Serious developers stress-test both metrics before buying. If either number is marginal, the risk is too high.
The formula
Development Margin (%) = (Net Profit / GDV) × 100
Why this matters
Profit on GDV is the metric that tells you whether your development is worth the risk. A 20% minimum is the standard. Below that, the project needs exceptional circumstances.
If you want to know exactly what a property is worth before you make an offer, Xelox Properties can help. We run the numbers so you do not have to.