Question $4$

A listed housing developer has been offered a residential site with planning permission for $60$ houses in the sum of $4\mathrm{.}29m.$

It estimates the average sale price to be $350,000,$ based on three$-$bedroom units of $125m2$ at a build cost of $2,150m2.$ In addition, road works and drainage will add a further $1,037,500$ to the costs. The design team will include an architect, engineer, and project manager. The developer usually allows $5\%$ contingencies and $3\%$ for statutory consents.

No pre$-$sales have yet been agreed and subject to finance the company intends to sell on completion to maximise their returns. Sales fees are likely to be $3\mathrm{.}00\%.$

The development schedule is based on phases of $10$ house sales, starting in month $7$ after commencement. The final completion is month $12.$

The expected interest rate including credit margin is $3\mathrm{.}25\%$ in view of the lack of preselling. The developer wants a $15\mathrm{.}00\%$ IRR before debt.

Setting out and fully explaining all your assumptions and further inputs you think relevant, prepare a cash flow, advising if this scheme is clearly viable the for the developer and if not what actions the developer could take to improve returns?