Gross development value (GDV) is the total market value of a development once it is finished: the sum of what its apartments, houses or commercial units would sell for, or what the completed income would be worth to a buyer. The RICS guidance note on valuing development property (1st edition, October 2019, in effect since 1 February 2020) values it on the “special assumption that the development is complete” on the valuation date, in that day's market. Here is how the figure is built, how lenders and investors use it beside loan-to-cost, and where it can mislead.
How the figure is built
Take an illustrative scheme of 20 apartments expected to sell at an average of CHF 1'100'000. Its GDV is CHF 22'000'000. The total cost of delivering it, land, construction, professional fees, finance and a contingency, comes to CHF 17'000'000. The CHF 5'000'000 between the two is the developer's margin, about 23% of GDV.
The same arithmetic runs the other way when a site is being priced. RICS describes the residual method in exactly these terms: take the GDV, subtract the total development costs including the developer's profit, and what remains is the value of the land. A buyer of a development site is, in effect, buying a forecast of GDV with the costs taken off.
Loan-to-cost and loan-to-GDV
Two ratios come out of those numbers, and a development facility is usually tested against both. Loan-to-cost (LTC) divides the facility by the total cost; loan-to-GDV (LTGDV) divides it by the completed value. A facility of CHF 11'900'000 on the scheme above sits at 70% of cost and 54% of GDV.
They answer different questions. Loan-to-cost asks how much of the developer's own money stands in the scheme, here CHF 5'100'000, committed before the facility is drawn and first to absorb an overrun. Loan-to-GDV asks how well the finished building covers the loan at the exit: at 54%, sales could come in 46% below plan before the facility itself is reached, before costs of sale and interest. A scheme can pass one test and fail the other, which is why a lender quoting only one is telling half the story.
Loan-to-cost versus loan-to-value
Loan-to-value, the ratio most borrowers know, uses the property's value as it stands today. On a cleared site that figure says little about the finished scheme, so development lenders move to cost and GDV once building starts. We covered the value-based ratio in our loan-to-value explainer.
Where GDV misleads
The figure is a forecast dressed as a valuation. It uses today's prices for a building that will be sold in two or three years, and nothing in the number moves with the market in between. RICS asks valuers to run sensitivity analysis on inputs such as construction cost and sales values for exactly this reason.
Small errors in GDV travel a long way. If average prices on the illustrative scheme come in 10% lower, GDV falls by CHF 2'200'000 while costs stay where they were, and the developer's margin drops from CHF 5'000'000 to CHF 2'800'000, a cut of 44%. The facility is still covered, but the equity cushion behind it has nearly halved.
Competition raises the stakes of reading it well. In the UK, Bayes Business School reported on 1 November 2026 that debt funds had become the main source of residential and commercial development funding in the first half of the year, and that margins on residential development finance had fallen to 447 basis points from 479 in six months, which the report reads as competitive pressure overriding risk. When terms loosen, the valuation underneath them carries more of the weight.
Where it sits in the diligence
GDV enters our nine-step process at the financial and collateral review (step 4), where the completed value is tested against sales or letting evidence and the cost plan against the building contract. It returns in ongoing monitoring (step 9): drawdowns are released stage by stage once each one is signed off, so the amount outstanding stays in step with what has been built, and a slipping GDV shows up while there is still time to act.
Where Watson AM fits
We arrange development finance for developers across Europe, inside a deal box of EUR 1M to EUR 50M+ at up to 75% loan-to-value, for terms of 6 to 72 months; each facility is presented to the investors in our network it suits, and they decide whether to fund. The clearest example in our published book is the Geneva residential scheme: CHF 12'000'000 for the acquisition and construction of 24 apartments over 36 months, at a loan-to-value of 25%, where heavy sponsor equity and a prime location left a wide cushion under the facility. Investor and borrower material is available on request.
Common questions
What is gross development value?
Gross development value (GDV) is the total market value of a property development once it is complete: the sum of what its units would sell for, or what its completed income would be worth. RICS guidance values it on the special assumption that the development is complete on the valuation date, in that day's market.
What is loan-to-GDV?
Loan-to-GDV (LTGDV) is a development facility expressed as a percentage of the scheme's gross development value. A loan of CHF 11'900'000 on a scheme with a GDV of CHF 22'000'000 sits at 54% LTGDV. It measures how well the finished building covers the loan at the exit.
What is the difference between loan-to-cost and loan-to-GDV?
Loan-to-cost divides the facility by the total cost of delivering the scheme, so it shows how much of the developer's own money is committed. Loan-to-GDV divides it by the completed value, so it shows the cover at the exit. Development lenders usually test a facility against both.
Watson AM, Basel. This article is general market commentary for professional and qualified investors and for real-estate developers. It isn't investment, legal, or tax advice, or an offer of any financial product.
Sources
- RICS, Valuation of development property, guidance note, global, 1st edition, October 2019, effective from 1 February 2020: the definition of gross development value (glossary), the residual method (section 6.1) and sensitivity analysis (section 7.1). rics.org.
- Bayes Business School (City St George’s, University of London), “UK commercial property lending jumps 29% as borrowers race to refinance”, 1 November 2026, on the H1 2026 UK Commercial Real Estate Lending Report (debt funds as the main source of UK development funding; residential development margins at 447 basis points from 479). bayes.citystgeorges.ac.uk.