Feasibility Study for a Real Estate Development and Investment Project in Egypt

Where the real risk in property development lies

A small developer buys a plot of land, or goes into partnership with its owner, then designs, obtains permits, builds and sells units. On paper the sum looks easy: total sales value minus the cost of land, construction and marketing equals profit. But many projects that get into trouble do not fail because the paper profit is negative; they fail because cash does not arrive when construction needs it.

The reason is that the market sells on instalments. The buyer pays a small down payment and then instalments that run for years, while the contractor and the steel and cement suppliers want their money now. The developer finances the difference between what goes out on construction and what comes in from buyers, and that difference is the funding gap. At its core, a good feasibility study for a development project is a monthly cash-flow table that measures this gap and shows where the money to cover it will come from.

Construction costs move during the build

A project like the example on this page takes 18 months to build, and prices do not stay still over that time. According to data from the Central Agency for Public Mobilization and Statistics (CAPMAS), the average price of a 50 kg bag of ordinary Portland cement rose from EGP 198.6 in June 2025 to EGP 215.9 in June 2026, an increase of about 8.7%, and the average price of a tonne of reinforcing steel rose from EGP 39,350 to EGP 41,340, an increase of about 5.1%¹.

In practice: do not price construction at the prices of the day you write the study if the build will run for 18 months. Include an allowance for cost increases, and know who carries price rises under your contract with the contractor: is the price fixed, or does it move with material prices? On the other side, instalment sale contracts fix the unit price, so if costs rise after you have sold, the increase comes out of your margin.

How to build a property development feasibility study month by month: illustrative example of a 10-unit building

This is an illustrative example. Its figures are assumptions to explain the method, not land or construction prices in any particular area:

• Land: EGP 6,000,000, and design and permits: EGP 500,000, both paid in month 0.
• Construction and finishing: EGP 9,000,000 paid evenly in months 1 to 18, i.e. EGP 500,000 a month. This figure is an assumption for illustration and may be below the actual cost in your area, so use real contractor quotes in your own study.
• Sales: 10 units at an average of EGP 2,000,000 each, i.e. EGP 20,000,000. Sales start in month three at one unit a month.
• Payment plan: a 20% down payment on signing, and the rest in 36 equal monthly instalments starting the month after signing. The unit price in the example is the same for cash and instalments, with no instalment premium; that is a cautious assumption, since some developers may price instalment plans above cash.
• Marketing and commissions: 3% of each unit's value, paid on signing.

Total cost is 6,000,000 + 500,000 + 9,000,000 + 600,000 = EGP 16,100,000, and profit before tax and financing is EGP 3,900,000, or 19.5% of sales. A figure that looks good on paper, but look at the cash (selected months):

Three things stand out in the table:

• The funding gap: the developer needs about EGP 7,873,333 at the deepest point, roughly twice the expected profit. That is the capital, or financing, that must actually be available.
• At handover: in month 18 every unit is sold and handed over, yet buyers still owe about EGP 11,333,333 in unpaid instalments, about 57% of the sales value.
• Time: the developer does not get back what they put in before month 35, about three years after buying the land, and the profit is complete only with the last instalment in month 48.

What if sales slow down or costs rise?

The same example with one or two assumptions changed. The 10% increase applies to construction cost only (from EGP 9,000,000 to 9,900,000), with sale prices unchanged. The IRR is calculated on the monthly cash flows and converted to a yearly rate:

In the slower-sales case the last sale is in month 22 and the last instalment in month 58. Note that slower sales alone do not change the final profit in this example, but they cut the yearly return from 17.7% to 13.3% and raise the funding gap by about EGP 2.2 million and delay payback by 5 months. Slow sales and higher costs together push the need to about EGP 11 million. A larger down payment with shorter instalments lowers the gap, brings payback 10 months earlier and lifts the yearly return to 28.9%, but it may slow sales, so test both effects together. In other words, in property development the payment plan can decide whether a project is worthwhile as much as the sale price does.

The cost of waiting: why total profit is not enough

The profit in the example is EGP 3,900,000, but it arrives over four years and requires about EGP 7.9 million to be tied up for a long time. The base case's IRR is about 17.7% a year. For comparison, at its meeting on 24 September 2026 the Central Bank of Egypt kept the overnight deposit rate at 19% and the overnight lending rate at 20%². So in its base case the project returns less than the overnight deposit rate, even though it shows a profit on paper. If the whole negative balance were financed with a loan costing 20% a year with interest added to the balance monthly, the interest alone would exceed the entire profit and the project would make a loss. The overnight deposit rate is an indicator of market rates, not necessarily the return available to you. The actual loan rate is set by the bank or lender, not by the central bank's rate, so ask before you calculate. The right way to compare profit that arrives over years with money you pay today is explained in our article on NPV and IRR explained.

How to reduce the funding gap

• Partner on the land with its owner in return for a share of the units instead of buying it for cash, which removes the largest amount from the start of the table. Illustrative example: in the same example, if the landowner took 3 of the 10 units instead of EGP 6,000,000 in cash and the developer sold the other seven on the same terms, the deepest cash need would fall to about EGP 3,386,667, the balance would turn positive in month 29, profit would rise to EGP 4,080,000 and the yearly return to about 50.9%. That high return is earned on a much smaller cash outlay, so it is not directly comparable with the base case. The 30% share is an assumption for the example; the actual share is negotiated with the landowner in a written contract after legal review.
• Sell before or as construction starts, provided permits and contracts are in order.
• Tie construction phases to sales: do not start a new phase until you have sold a set share of the units.
• A payment plan that fits the build schedule: larger payments at handover, for example, instead of equal instalments that run for years after delivery.
• A cost contingency in the study, and a construction contract that is clear on who carries price changes.
• Protect the instalments after handover: at handover in the example about 57% of the sales value is still owed by buyers, so a few defaults change the whole table. Agree payment guarantees in the contract, and include a default rate in the pessimistic scenario.

Common mistakes in a property development feasibility study

1. Calculating profit from total sales without a monthly cash table showing when instalments come in.
2. Construction costs at today's prices for a project built over 18 months or more.
3. Assuming every unit sells at a steady pace, with no slow-sales scenario.
4. Forgetting marketing and commissions, which are paid on signing, not when the last instalment is collected.
5. Ignoring the cost of financing when instalments run for years after handover.
6. Starting without a clear source to cover the deepest point in the table.
7. Judging the project by total profit alone, without comparing the yearly return with the cost of financing or a low-risk alternative actually available to you.

To understand the difference between profit and cash and how to build a month-by-month cash table, see our article on cash flow for small businesses. If you will sell your units through a marketing company, also read about a real estate marketing company feasibility study to see how commissions work from their side.

Frequently asked questions about a property development feasibility study

Sources

1. Al Mal News. «الإحصاء»: أسعار الأسمنت ترتفع حتى 12.1% والأسمدة تصل إلى 56.6% خلال عام (in Arabic) (2026-08-16) — secondary source. Checked 22 October 2026.
2. Akhbar El-Yom. 29 أكتوبر.. البنك المركزي يحسم مصير أسعار الفائدة على الإيداع والإقراض (in Arabic) (2026-10-19) — secondary source. Checked 22 October 2026.