Key challenges in conducting development appraisals in Sri Lanka

Abstract

Property development is an activity constituent with both huge returns and risks. Development appraisal is a method, primarily used to check the financial viability of a property development project. In Sri Lanka, it is known as feasibility study. Several development appraisal techniques are practised in association with risk analysis methods in the Sri Lankan property market. Development appraisal is subjected to many variables and therefore it is a challenging task. This research investigates the challenges in conducting development appraisal and suggests ways of resolving such challenges. Survey approach with 32 sample questionnaires was adopted in investigating the research problem. The Relative Important Index was used to rank the challenges based on the magnitude and significance of challenges. The research found that discounted cash flow method is being used extensively in Sri Lanka. Top ranked key challenges are client’s influence and estimating the variables. The research suggested carrying out detailed market survey to obtain relevant data, maintaining internal building cost database and practicing risk analysis techniques to overcome the challenges. Therefore, the research recommends that a Quantity Surveyor who involves in development appraisal could provide building/construction cost data, calculate the net lettable areas of the building, and determine the timing of cash inflows and outflows during construction period.