Theoretical Buildable Area ≠ Real Buildable Area

Example:

Plot size: 750 sqm
FAR: 0.8

Theoretical buildable area:

750 × 0.8 = 600 sqm

That is what the paper says.

But in practice you must verify:

• Maximum permitted height

• Mandatory setbacks

• Coverage ratio

• Plot width and shape

• Open space requirements

There are cases where:

Theoretical: 600 sqm
Actually buildable: 540–580 sqm

Without an architectural feasibility check, FAR is just theory.

The Correct Land Value Equation

Assumptions:

• Sale price: €4,250 / sqm

• Construction cost: €2,500 / sqm

• Developer margin: 30%

• Buildable area: 600 sqm

Step 1: Cost Including Developer Profit

€2,500 × 1.30 = €3,250 / sqm

Step 2: Residual Value for Land

€4,250 − €3,250 = €1,000 / buildable sqm

Step 3: Total Land Value

600 × €1,000 = €600,000

Under these assumptions:

The plot “supports” approximately €600,000.

Anything above that:

• Compresses margin

• Increases risk

• Makes the project fragile

And this is before including:

• Soft costs (studies, permits)

• Financing costs

• Marketing

• Taxes

• Contingencies

The Time Dimension: The Hidden Risk

A 30% margin is not a 30% annual return.

If the project is completed in 2 years:

30% total margin ≈ 15% per year.

That is healthy for development risk.

If delays extend the project to 3 years:

The same 30% margin becomes ≈ 10% per year.

The developer:

• Locks capital for longer

• Delays the next project

• Carries higher exposure

If prices soften during that period,
annual returns can easily fall to single digits.

A “30% margin project” can quickly become an 8% annual return.

For development risk, that is a very different equation.

Why This Matters to the Landowner

If the land price is set too high:

• The project becomes non-viable

• The developer walks away

• The partnership collapses

If the land price is realistic:

• The project moves forward

• Risk is balanced

• Returns are sustainable

The equation must work for both sides.

The Biggest Mistake

To calculate:

FAR × market price per sqm

and assume that equals land value.

The correct sequence is:

1. Realistically buildable sqm

2. Realistic selling price

3. Construction cost

4. Sustainable developer margin

5. Time risk adjustment

What remains is land value.

Not the other way around.

Strategic Conclusion

The Building Coefficient is not just a zoning number.

It is:

• A value lever

• A risk indicator

• A development feasibility tool

Land pricing is not a negotiation game.

It is a mathematical balance that must work for:

• The landowner

• The developer

• The timeline

• The market cycle

If it does not work for all,
the project will never materialize.

The Role of Poli Real Estate

At Poli Real Estate, FAR is not treated as a technical detail.

It is analyzed in relation to:

• Margin

• Time

• Risk

• Liquidity

Because a plot may look like an opportunity —
and still not be financially viable.

👉 Submit your plot details for a full feasibility analysis before committing.