This essay focuses on feasibility study in commercial and residential property development. Feasibility study is one of the first stages in the analysis of any investment project. Screening of investment projects takes a lot of different methods. Some developers use rules of thumb, gut feeling, back of the envelope proforma studies and/or formal feasibility study.

The hypothesis considered in this essay is that formal feasibility study is the best appraisal study for property development in today's ever increasingly sophisticated world. The hypothesis is considered with an understanding that feasibility analyses do not necessarily provide definitive answers to all property development projects nor are they the panacea that every developer would prefer them to be.



Objective of the study: To demonstrate that Feasibility Study is the key to successful property development.



Successful property development test: Successful property development is when the completed accommodation meets the requirement of optimum occupancy, appropriate financial return and public acceptance.



The study uses the case study approach. It is hoped that a case study rather than a complete generalized approach will better illustrate the practical advantages and limitations of feasibility study.

Primary data were obtained through interviews and physical inspection of completed property developments of PT Ciputra Development and Lippo Land Development. Secondary data were obtained from library study.



Importance of the study: Formal feasibility study helps circumvent poor project appraisal and evaluation by both investors and lenders. Feasibility analysis is a principal mechanism necessary to produce a comprehensive study and range of results to a particular property scenario; to provide a series of checks and balances to determine the viability of an investment proposal or property development opportunity.

The key in making any investment decision is to know as many of the facts, to understand and test the many variables on facts that have indeterminate limits, prior to having to make the final decision. The collapse of many property companies after the 1987 Share Market crash, Japanese banks' bad loans after collapse of real estate values, and the recent Lippo Bank cashflow problems believed to be property led (after alleged failure to market its huge property projects), all show the need for a well considered and constructed feasibility study for each project.



Research Study: PT Ciputra Development

Supervisor: Wiwek M. D.

Accepted: December 1995