Real estate projects can be evaluated by different methods that vary in complexity. Financial experts always advise that it is better to do proper audits and timely evaluation of the expenditures at every stage of development so as to do away with the waste in expenditure. Cost overruns have forced many of the real estate developers to wind up their operations due to decreasing profits. However, the prominent names in the Real Estate Business in India are those who have incorporated better business practices.

Through comparative costing, it will be possible to analyze the project costs at various stages of development. Here a straight comparison is made between the initial capital costs of projects, and these may be the determining factor when funds are limited. Otherwise it suffers from the obvious weakness that it fails to take into account the size and timing of Net Annual Revenues (NARs), since all projects are rated equally.

Analyzing the cut-off period is very important. A developer needs to choose a period within which the initial cost could be recouped. Since the leading financial institutions finance a majority of the real estate projects, the built up spaces must be sold out in record time or else it will be difficult for the real estate developer to stay profitable.

Real estate businesses that are able to keep the pay back period to the shortest possible time gain more profits. Here investment options are ranked according to how long income yields take to recoup the initial outlay. This method can be justified where uncertainty, either as regards future cash returns or obsolescence of equipment, is marked for then a possible quick exit must be borne in mind. But it fails to take into account the differences in the timing of yields earned before the payback date. Yields earned after the payback date will most probably be taken up to pay the interest.