Sale Stream
Component 3: Project IRR
Component 3 calculates the unlevered Project IRR based on the cash inflows (sales revenue) from Component 2 and cash outflows (development costs) from Component 1. This is a read-only component that consolidates your project's financial performance into key return metrics.
Overview
Component 3 is a single-step, read-only component that automatically calculates the Project IRR once you complete Components 1 and 2. It provides three key metrics and two visual charts to help you understand the project's financial performance and payback timing.
Key Output Metrics
Unlevered IRR (annual)
4.63%
Annualized return on project
Equity Multiple
1.11x
Total returns ÷ Total invested
Payback
M36
Month of full recovery
Project Timeline Structure
The Sale Stream Project IRR covers a shorter timeline than the Operational Stream. The project lifecycle is divided into two phases:
Phase 1: Construction (M0–M30)
The construction period where all capital expenditure occurs. Duration is user-defined in Component 1 (typically 24-36 months depending on project scale).
- Land acquisition costs (M0)
- Construction costs (phased via S-Curve)
- Soft costs, POWC
- Sales revenue begins during construction (pre-sales and progress payments)
Phase 2: Post-Completion Collection Period
DYNAMIC JURISDICTION TIMELINEAfter construction completion, FeasiBuild automatically extends the timeline to capture final sales collections, handover payments, and mortgage disbursements. Unlike a fixed buffer, this period is dynamically calculated based on your project's jurisdiction and asset type:
- Malaysia (HDA): Construction Period + 24 months (to account for VP retention and staged releases).
- UAE / Australia: Construction Period + 12 months (standard escrow release and final settlement).
- Commercial / Non-Escrow: Construction Period + 6 months (direct sales collection).
Why Dynamic? Different jurisdictions have strict regulatory timelines for escrow release, defect liability periods, and final title transfers. FeasiBuild enforces these canonical horizons to ensure realistic cash flow modeling and accurate IRR calculations.
Key Metrics Explained
Component 3 displays three critical return metrics that help you assess project viability:
Unlevered IRR (Annual)
The Internal Rate of Return on the project's unlevered cash flows (before debt service). This represents the pure project return independent of financing structure.
Example: For a project with 4.63% IRR, the net present value of all cash flows (construction costs + sales revenue) discounted at 4.63% annually equals zero. This means the project generates a 4.63% annualized return on invested capital.
Equity Multiple
Also known as the "Money-on-Money" (MoM) multiple. This is the ratio of total cash returned to total cash invested.
Example: An equity multiple of 1.11x means that for every AED 1.00 invested, the project returns AED 1.11. This represents a 11% total return over the project lifecycle (not annualized).
Payback (Month)
The month in which cumulative cash flow turns positive (≥ 0). This is the "break-even" point where the project has recovered all invested capital.
Example: Payback at M36 means the project recovers all invested capital by the end of the 36-month timeline (construction + 6-month post-completion). For sale developments, payback typically occurs at or near the end of the project when final sales collections are received.
Visual Charts
Component 3 provides two visual charts to help you understand the project's cash flow dynamics and payback timing:
Net Cash Flow (Monthly Timeline)
This bar chart shows the net cash flow for each month, with negative values (outflows) in red and positive values (inflows) in green.
Red Bars (Negative)
Months where cash outflows (construction costs, land, soft costs) exceed cash inflows (sales). Typically occurs in early months (M0-M10) when land is paid and construction begins but sales are minimal.
Blue Bars (Near Zero)
Months where inflows and outflows are roughly balanced. Typically occurs in mid-construction when sales collections start to offset construction costs.
Green Bars (Positive)
Months where sales revenue exceeds costs. Typically occurs in late construction and post-completion (M25-M36) when most units are sold and collections accelerate.
Cumulative Cash Flow & Payback (Monthly Timeline)
This line chart shows the cumulative sum of monthly cash flows. The line starts negative (representing initial investment) and trends upward as sales revenue is collected. The point where the line crosses zero is the payback month.
Payback Marker
The amber dot and dashed line indicate the exact month where cumulative cash flow turns positive. In the example, payback occurs at M36 (end of project).
Zero Line
The horizontal dashed line at zero represents the break-even point. When the cumulative cash flow line crosses this, the project has recovered all invested capital.
NPV Table Methodology
Behind the scenes, FeasiBuild uses the Discount Factor Method to calculate the Project IRR. The NPV Table shows the detailed monthly breakdown:
Net Cash Flow Row
Shows the net cash flow for each month (inflows minus outflows). Negative values are shown in red, positive values in green.
Discount Factor Row
Calculated as: 1 / (1 + monthly_IRR)^m where monthly_IRR = annual_IRR / 12. This converts future cash flows to present value terms.
Discounted Cash Flow Row
Calculated as: Net Cash Flow × Discount Factor. This shows the present value of each month's cash flow.
Cumulative NPV Row
Running total of discounted cash flows. The IRR is solved so that cumulative NPV approaches zero at the final month (M36).
Interpreting the Results
Understanding what the Project IRR tells you about your sale development:
Project IRR vs. Required Return
Compare your Project IRR against your required return threshold (hurdle rate):
Typical IRR Benchmarks for Sale Developments
Sale Stream vs. Operational Stream IRR
Sale Stream IRRs are typically lower than Operational Stream IRRs for comparable projects because:
- Shorter timeline (36 months vs. 13+ years) means less time for value appreciation
- No terminal value capture (all returns come from unit sales, not asset appreciation)
- Higher risk profile (construction risk, sales risk, market timing risk)
- Lower equity multiple (1.11x vs. 4-5x for operational assets)
However, Sale Stream projects offer faster capital recycling — you can complete and exit the project in 3 years vs. holding for 10+ years.
Tips & Best Practices
Focus on Sales Velocity
The #1 driver of Project IRR in sale developments is sales velocity. Faster sales = earlier cash inflows = higher IRR. Use conservative uptake curves and validate against comparable project absorption rates.
Pre-Launch Sales Boost IRR
Starting sales 6 months before construction and achieving 10-20% pre-launch sales can significantly improve IRR by bringing cash inflows forward and reducing the funding gap.
Minimize the Funding Gap
The funding gap (peak negative cumulative cash flow) determines your financing needs. A smaller gap means lower debt costs and higher equity returns. Optimize payment plans and sales timing to reduce the gap.
Sensitivity Analysis is Critical
After reviewing Component 3, proceed to Scenario Analysis to test how changes in sales price, uptake speed, and construction costs affect your IRR. Sale developments are highly sensitive to market timing.