Construction Feasibility Study Supporting Investment Decisions in Saudi Arabia
The client lacked clarity on occupancy demand trends post-COVID, construction cost escalations, and regulatory delays. Internal assumptions on revenue projections were optimistic but unsupported by rigorous market or engineering data. Investors were skeptical due to limited comparable projects in that region. The client risked costly rework or project shelving unless supported by an authoritative feasibility assessment.
The feasibility assessment included:
- Market study of residential absorption and retail footfall in target area
- Capex model incorporating recent construction inflation and supplier rates
- Revenue forecast based on unit pricing, occupancy ramps, and seasonal performance
- Scenario analysis with downside risk triggers and contingency strategies
- Regulatory compliance timeline simulation
Financial models were validated by external real estate advisors for credibility.
To strengthen project viability:
- Phase the retail and hospitality portions after residential units reach 70% occupancy
- Secure fixed-price construction contracts to mitigate inflation exposure
- Establish partnerships with branded operators for hospitality components
- Incorporate ESG features to enhance financing attractiveness
- Set a 10% contingency buffer in cash flow planning
These helped derisk the development while maximizing upside potential.
The client secured SAR 520 million in initial debt financing within three months of study completion. Project IRR was validated at 16.2%, with stress-tested IRR floor of 11.8%. The phased launch strategy shortened breakeven timeline by 14 months. Most importantly, investor confidence was restored, allowing the project to progress without major redesign or cost escalation.
