Chirayuthchai TraisaengsatheanStrategic Finance for Property Development
THEN

Stage 03 / 05 · Construction & Cost Control

Stage 3 Construction

Control costs, drawdowns, sales and Covenants during the period of peak cash outflow

Key questionWill the project be completed within budget and on time, with enough cash to reach transfer day?

Checklists and strategic questions5-Stage Overview

Duration
18–36 monthsThe period of the project's peak cash outflow
Decision gate
Topping-out
Monthly remaining cost report
Sales against plan

Focus Areas

Key issues in Stage 3

  1. 01Control costsCost-to-Complete, variation orders and use of contingencyGo to section →
  2. 02DrawdownsContractor progress payments against the S-curve, retention and loan drawdownsGo to section →
  3. 03SalesSales and down payments against plan, and adjusting the sales planGo to section →
  4. 04CovenantsDSCR, cash runway and the timing of additional capital calls during peak outflowGo to section →

Executive Summary

Executive summary

  • This is the stage with the highest cash outflow, and Peak Funding occurs towards the end, before transfers begin
  • The main tool is a monthly Cost-to-Complete, not the construction percentage alone
  • Duration is 18–36 months. Every month of delay means more interest, soft costs and revenue pushed back

Key Metrics

Metrics to watch

  • Cost-to-Complete≤ budget + 5–10%Including contingency
  • Presale before completion60–80%Target
  • DSCR1.25x–1.50xPer Covenant
  • Actual vs S-CurveIn line with base planActual work and drawdowns
  • Cash RunwayNot negativeTo transfer day in the stress case

Figures are drawn from the website content; use figures from your own model and the funding terms of the actual project.

01 · Key DecisionsDecisions to make

  • Whether to approve a variation order Every VO affects Cost-to-Complete and contingency
  • How to use contingency Who approves it, and what remaining balance triggers a report to the board
  • Whether to adjust the sales plan Price, promotions and payment terms when absorption is below plan
  • When to call for additional capital This should be known in advance, not when cash is nearly gone
  • Whether to accelerate the work or accept delay Compare acceleration costs with interest and the effect on the transfer day

02 · Finance · Tax · LegalFinance, tax and legal tasks

Finance

  • Pay the contractor against progress payment certificates (IPC) certified by the QS, and record retention in the register
  • Draw down funding against the S-curve and track IDC monthly
  • Prepare a cost-value reconciliation and Cost-to-Complete monthly
  • Forecast cash flow on a 13-week basis and over the life of the project
  • Report Covenants and progress to funders on schedule

Accounting and tax

  • Accumulate development costs as inventory under TAS 2 and test net realisable value (NRV) when market prices or costs change
  • Withhold 3% WHT on contract work and services, and file PND 3 or PND 53 depending on the recipient
  • Manage input VAT and file PP 30 monthly. A project selling condominium units pays SBT, not VAT, so eligibility for input VAT credit must be checked with the auditor or tax adviser
  • The current VAT rate of 7% applies until 30 September 2027 under the latest Royal Decree
  • File PND 51 within 2 months after the end of the first half of the accounting period, and PND 50 within 150 days after the end of the accounting period
  • Customer instalments remain a contractual liability throughout construction

Law

  • Build in line with the conditions of the EIA report and the building permit; design changes that affect those conditions must be checked before the work is done
  • Keep a monthly foreign quota register so that it matches the figures the condominium juristic person will manage later
  • Check that the bond and the CAR policy remain valid and still provide cover if the programme slips
Monthly cost and cash control cycleSummarised from the finance tasks above
Monthly cost and cash control cycleMonthly cycle: the contractor submits an IPC, the QS certifies it and retention is recorded, payment is made and the loan drawn against the S-curve, cost-value reconciliation and cost-to-complete are updated, a 13-week cash forecast is prepared, and covenants are reported to funders, then the cycle repeats.Contractor submits interim payment claim (IPC)1Contractor submits interimpayment claim (IPC)QS certifies the claim, retention recorded2QS certifies the claim,retention recordedPay and draw the loan against S-curve · IDC3Pay and draw the loanagainst S-curve · IDCCost-value reconciliation and cost-to-complete4Cost-value reconciliationand cost-to-complete13-week cash forecast and whole-life forecast513-week cash forecastand whole-life forecastCovenant and progress report to funders6Covenant and progressreport to fundersEvery monthDecide on VOs · contingency · sales plan · extra equity

03 · RoadmapRoadmap tasks

P7 Construction, cost control and financing during construction

#TaskCategoryResponsible partyOutcomeTime
7.2Inspect progress payments & certify monthlyInvestment budgetQS/PMCertified IPCs, valuation, retentionMonthly
7.3Draw down funding per the S-curveFinanceFinance teamDrawdowns against plan, track IDCMonthly
7.4WHT on contractor/consultant feesFinanceFinance teamWithhold WHT & file returnsMonthly
7.5Manage input VATFinanceFinance teamRecord/reclaim input VATMonthly
7.6Remaining cost & budget vs actual (CVR)Investment budgetQS/FinanceMonthly cost-value reconciliation report ⚠ Track cost overruns earlyMonthly
7.7Variations / change managementLegal/CAPEXPMVO register, contingency usage controlOngoing
7.8Monitor quality, safety & environmentLawPMInspection reports, safety & monitoringOngoing
7.9Track sales & foreign quota registerLegal/financeSales/LawyerSales vs plan, foreign quota registerMonthly
7.10Collect buyer instalments (contract liability)FinanceFinance teamCollect instalments; record as revenue received in advancePer instalment
7.11Comply with funding conditions & report to fundersFinanceFinance teamReport conditions/financials to fundersQuarterly
7.12File corporate income tax returns per cycleFinanceTax teamHalf-year & annual tax returnsPer cycle
7.13◆ Structure topped outTechnicalContractorStructural completion milestoneMilestone

04 · MetricsMetrics to watch

FigureReference level from the source documentNotes
Cost-to-Complete vs budgetWithin budget + 5–10% contingencyThai industry overruns budgets by 5–15% on average, per Chapter 1
Remaining contingency vs remaining workShould reduce in proportion to the work doneUsing it faster than progress is a warning sign
Actual vs S-CurvePer baseline programmeLook at both actual work and funds drawn
Presale before construction completionTarget 60–80%Used to plan refinancing and the transfer day
Overdue instalmentsTrack AR agingA sign that customers are abandoning their down payments
DSCR, LTC, Sales-to-DrawdownPer Covenant; reference DSCR 1.25x–1.50xForecast headroom in advance, at least quarterly
Cash runway to transfer dayMust not go negative in the stress caseThe most important figure at this stage
Actual vs S-curve: watch both work done and cash drawnIllustrative only, not real project data
Actual vs S-curve: watch both work done and cash drawnThe baseline plan follows an S shape. At the reporting month actual work is below plan, while cash drawn is above actual work, a signal to investigate.0%25%50%75%100%0100%Construction period →Cumulative %Baseline plan (S-curve)Cash drawnActual workReporting monthWork behind planReporting month:Cash drawn ahead of workBaseline planActual workCash drawn

Estimate at Completion = cumulative actual cost + Cost-to-Complete

Cost overrun = Estimate at Completion - approved budget

Estimate at Completion vs approved budgetConceptual view of the formulas above; proportions are examples
Estimate at Completion vs approved budgetCumulative actual cost plus cost-to-complete gives the Estimate at Completion; compared with the approved budget, the difference is the cost overrun. Within contingency, continue; beyond it, pause and re-plan.BudgetApproved budgetContingency 5–10%Contingency 5–10%ForecastCumulative actual costCost-to-completeEstimate at Completion (EAC)Cost overrunEAC within budget plus contingency→ continue as plannedEAC beyond this line→ pause to re-plan: VE, negotiate VOs, raise funds

05 · Decision GateDecision gate

The main gate at this stage is topping-out, plus monthly gates from the cost and cash reports. The choice at this stage is usually not whether to stop the project, but how to close the gap as quickly as possible

Proceed as planned

  • Estimate at Completion is within the total budget including contingency
  • Actual work is not behind the S-curve by more than the agreed threshold
  • Sales and instalments are on plan
  • Covenants have headroom
  • Cash is sufficient to reach transfer day in the stress case

Pause to adjust the plan

  • Forecast cost exceeds contingency: do VE, negotiate VOs, raise additional funding
  • Presale below plan: adjust prices and terms, and retest Peak
  • Contractor in financial difficulty: check the bond and the fallback plan
  • Close to breaching a Covenant: talk to the funder before the reporting date

06 · Common PitfallsCommon pitfalls

  • Reporting only the construction percentage and not Cost-to-Complete
  • Approving VOs one by one without looking at the aggregate effect on contingency
  • Paying progress payments on the contractor's request without independent certification
  • Failing to stop capitalising interest in time when development is mostly complete, or continuing to capitalise during long work stoppages
  • Waiting until a Covenant breach is close before informing the funder
  • Not adjusting the transfer day in the model when work is delayed
  • Letting FF&E and fit-out costs at the end of the project exceed budget because attention was only on structural work

Sources

  1. Development Breakdown & Roadmap: Condominium-for-Sale (generic template)
  2. Real Estate Project Strategic Financial Management Handbook: A Practical Guide
  3. Strategic Finance Handbook, Chapter 1
  4. Thailand VAT 7% extended, Royal Decree No. 807

Compiled by Chirayuthchai Traisaengsathean
Last reviewed 9 Nov 2026

This article provides general information for educational purposes and is not advice on investment, legal, accounting or tax matters for any specific case. Check the current laws and standards before applying it.

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Key questions Strategic Questions

  1. By how much does the Estimate at Completion exceed the approved budget, and is the remaining contingency enough to cover the difference?
  2. If we need to call for additional equity, how many months' notice do we have, and have shareholders been informed?
  3. Is the cost of accelerating the work justified by the interest saved and by the impact of a postponed transfer day?
  4. If absorption falls below plan, should we adjust the price, promotions or payment terms, and how much does Peak Funding change?
  5. If we are close to breaching a Covenant, have we spoken to the lender before the reporting date?
  6. If the main contractor runs into financial difficulty, how much of the loss do the bond and the backup plan cover?
Related parts of the handbook

Strategic Finance

Project Accounting

Real Estate Project Law