Value-Add Methodology
Stage-of-Completion Pricing: Four Prices, One Villa
Stage-of-completion pricing quotes one villa at four prices (land, shell, turnkey, furnished) and the market tends to blend them into one sliding discount. Each rung carries a different amount already spent, a different holder of construction risk and a different time left to discount. An off-plan discount is compensation priced at signing. It becomes a gain only when the building is finished and the value is observed.
IllustrationKey takeaways
- - One villa carries four prices (land, shell, turnkey, furnished), each with a different amount spent, risk holder and time left to discount (Victaura Research framework, built on RICS, Valuation of development property, 2019).
- - RICS defines gross development value on the assumption that the development is complete on the valuation date, so a shell is valued as completed value less cost to complete (RICS, section 8.2 and glossary).
- - Costs spent do not necessarily equal value, and a low point valuation can sit below acquisition plus sums spent (RICS, sections 8.3 and 8.4).
- - Dubai Law No. 8 of 2007 requires an escrow account before an off-plan sale and dedicates it exclusively to construction of the project (Articles 6 and 9(1), English translation).
- - After the completion certificate, the escrow agent retains 5% of each account's total value, released one year after units are registered to purchasers (Dubai Law No. 8 of 2007, Article 14, measured).
- - Escrow secures where money goes and not when the building is delivered. The translated statute contains no staged-withdrawal table, and the Land Department's FAQ describes releases by construction stage after a site check by the escrow agent's engineer (Dubai Law No. 8 of 2007, our reading of the translation; Dubai Land Department FAQ).
- - In Indonesia a building approval (PBG) is obtained before construction and a Certificate of Functionality (SLF) is required before use (Government Regulation 16 of 2021, per a BPK West Java legal note, September 2024, secondary reading). In the sources reviewed, no statutory escrow or buyer-guarantee regime was found for Indonesian off-plan villa sales, a question for Indonesian counsel.
- - An off-plan discount is compensation priced at signing and is not a gain before completion. Off-plan was over 70% of Dubai residential transactions in H1 2025 (Cavendish Maxwell, directional, press-reported).
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What is stage-of-completion pricing for a villa?
Stage-of-completion pricing is the practice of quoting one villa at the price that fits the stage the building has reached. Land, shell (the Italian rustico), turnkey and furnished are four rungs on one ladder. Each rung has a different amount already spent, a different holder of construction risk and a different time left to discount. The market tends to quote the four as one asset at a sliding discount. That blend is the error this note tests.
The anchor definition comes from valuation practice, not from sales material. The RICS professional standard on development property defines gross development value as the aggregate market value of the proposed development, assessed on the special assumption that it is complete on the valuation date. A shell is therefore never valued at its quoted completion price. It is valued against a completed benchmark, less what remains to be spent and a margin for what can still go wrong.
The brief for the principal is narrow. This note does not argue that buying off-plan, before the building is complete, is cheap or expensive. It asks what a principal is actually buying at each rung, who stands between the buyer and a stopped site, and how much of a quoted discount is compensation rather than gain. The evidence is statute, valuation standards and accounting guidance. Market figures are graded where they are used, and figures that could not be traced to disclosed data are left out.
The jurisdictions used are Dubai, Indonesia and Spain, because their rules are public and different. Dubai supplies an escrow statute. Indonesia supplies a permit chain that defines when a building is legally finished. Spain supplies a buyer-guarantee regime that shows how a paper protection can fail in practice. None of the three is a template for the others, and the differences are the point.
Stage-of-completion price: what each rung already contains
Land is the rung where almost everything paid is recoverable only by selling the site itself. The principal pays for title, location and permission, and no structure exists. Whether permission exists matters more than the soil. In the RICS basic residual method, land is the balancing item, equal to completed value minus build cost, planning costs and developer's profit. That item moves sharply when any input moves.
*The shell, or rustico, turns cash into structure and into irreversibility.* Foundations, frame and roof are sunk. They cannot be resold apart from the site. RICS notes that costs expended or to be expended do not necessarily equate to value, and that a so-called low point valuation can sit below acquisition cost plus the sums spent, depending on the stage of construction. A shell can be worth less than its invoices.
Turnkey is the first rung that a resale or rental market can price directly. Services, finishes and external works are complete. What remains is snagging (fixing minor defects), certification and handover. Comparable transactions become usable evidence here. RICS says the market comparison approach is unlikely to be the most appropriate for partially complete developments, which places the first two rungs in residual territory and the third in market territory.
Furnished adds the thinnest layer of cost and the thickest layer of assumption. Fixtures, furniture and equipment are the cheapest components to replace and the fastest to wear. A premium asked for a furnished unit is easy to quote and hard to realise on resale. The principal should treat furnishings as a consumable at replacement cost less wear, and not as a component of structural value.
Who carries construction risk under Dubai's escrow law?
Under Dubai's escrow law, completion risk stays with the buyer, while buyer money sits in a project account dedicated to construction that a developer must open before selling off-plan. Law No. 8 of 2007 requires a developer who wishes to sell units off-plan to request an escrow account from the Land Department (Article 6), under a written agreement with an escrow agent (Article 7). The account is dedicated exclusively to construction of that project (Article 9(1)), and finance-institution loans are paid into it (Article 13).
The statute protects where the money goes, not the schedule it follows. The English translation we read contains no staged-withdrawal table and no engineer-certification duty. The Land Department's FAQ describes the practice. The agreement with the escrow agent, which the FAQ calls the account trustee, lists the major construction stages that must be finished before payments are released, and the trustee's engineer visits the site to confirm each stage. We did not find that rule in the statute, so it is the Land Department's stated practice and not statute. The Department may seek outside help to audit the escrow agent's statements (Article 11(1)).
Completion is where the statute keeps a hostage. Once the developer obtains the completion certificate, the escrow agent retains five percent of the total value of each escrow account, released one year after the units are registered in purchasers' names (Article 14). Even at the turnkey rung, a slice of project money stays locked until a year after registration. The statute does not label it a defects cushion. The Land Department's FAQ describes it as a guarantee that defects visible at completion, or appearing within a year of handover, are fixed.
Escrow transfers destination risk to a regulated account and leaves completion risk with the buyer. A site can stall while unreleased cash stays in the account. Article 15 tells the escrow agent, in an emergency where the project is not completed and after consulting the Department, to protect depositors by having the project completed or by refunding payments, and it sets no delivery date. The principal who remains in the contract still carries the delay and the exit date. Cost overrun reaches the principal through the developer's capacity to absorb it, unless the contract passes it on directly. How legible the surrounding system is belongs to the wider transparency input to underwriting.
A shell is not a cheap finished villa. It is a claim on a completed value, less what remains to be spent, less what can still go wrong.
Victaura Research
How does Indonesia's permit chain define a finished villa?
In Indonesia, finished is a legal state, because a completed building needs a Certificate of Functionality (SLF) before use. Government Regulation 16 of 2021 replaced the old building permit (IMB) with a Building Approval (PBG), obtained before construction through the national SIMBG system. It defines the SLF as a certificate issued by the regional government stating that a building is fit for its function before it may be used (Article 1(18)). Our source is a September 2024 legal note by the West Java office of the Indonesian Audit Board (BPK) that quotes the regulation, so the reading is secondary.
That puts a legal gate between turnkey and usable. A building physically complete without an SLF is, in the regulation's terms, not ready for use. The principal's turnkey price should be read as conditional on that certificate. We did not verify later amendments, and current SIMBG practice should be confirmed with Indonesian counsel before any price is relied on.
Pre-sale rules add a second gate that is easy to misread. In its original text, Article 42 of Law 1/2011 allows single, terraced and stacked houses still under construction to be marketed through a preliminary sale agreement (PPJB) only once there is certainty on land title, the subject of the agreement, the building permit, public infrastructure and at least 20% of the housing built. The article was later amended by the Job Creation legislation, and we did not read the amended wording. Regulation 11/PRT/M/2019 of the Minister of Public Works and Public Housing (PUPR) governs the PPJB system. The grade is directional.
Applied to any Bali villa cluster, the question becomes which gate a given project has passed. The public card for the Bali additional villa cluster is the reference for what Victaura states about that project, and this note adds no price, stage or return to it. A principal reading any Bali stage price should ask for the PBG, the status of the construction contract and the SLF, in that order.
RICS residual and DCF: discounting the time left
RICS offers two ways to value land in the course of development, and they need not agree. The first is the value of the land plus the costs expended at the valuation date. The second is the completed development value minus the costs remaining to be spent (section 8.2). The standard says that in some cases both could be employed as a check against the other (section 8.3). The second is the one a buyer's discount actually negotiates, completed value less cost to complete.
Time is priced twice, once in the cash flow and once in the rate. A discounted cash flow needs explicit period-by-period assumptions and a stated target rate of return (sections 6.2.4 and 6.2.5). Differential rates for different parts of the cash flow, according to their risk profile, are acceptable. A project near completion will normally be viewed as less risky than one at an early stage, and an additional risk discount may reflect complexity, stage of construction and the state of the market (section 8.4).
Small input changes produce large output changes. RICS states that small variations in inputs can cause relatively high variations in the residual output, and that reliance should not be placed on a single approach (section 7.1.2). It asks for sensitivity analysis on construction cost and sales values (section 7.1.4). As an arithmetic illustration only, and not market data, a shell quoted at 80 against a completed value of 100 with 15 left to spend leaves 5 to cover time, risk and profit before any finance.
The level of the rate matters for the time term, and so does the currency. As of its Board of Governors meeting of 22 and 23 September 2026, Bank Indonesia held its policy rate at 5.75%, as reported by Investortrust.id. A policy rate is a reference for local funding cost. It is not a discount rate for a villa, and it is quoted in rupiah. A principal whose capital sits in another currency discounts the time left and carries currency risk on top.
Why is an off-plan discount not a gain before completion?
An off-plan discount is compensation priced at signing, and it becomes a gain only when the building is finished and the value is observed. Until that day the principal carries cost overrun, delay, permit, counterparty and exit risk. A discount that merely offsets those risks is a premium paid to the party bearing them, in kind. Booking it as return on day one counts a payment for risk as if the risk had already been survived.
Accounting guidance has reached a similar result in at least one documented case. In March 2018 the IFRS Interpretations Committee published an agenda decision on a residential unit sold off-plan, where courts had allowed buyers to cancel in particular circumstances and the developer kept only a termination penalty, so it had no enforceable right to payment for performance to date. On that fact pattern, none of the IFRS 15 paragraph 35 criteria were met, and revenue is recognised at a point in time and not progressively. It is one fact pattern in one legal environment, and it does not settle the treatment of every off-plan contract.
Paper value and realised value sit in different ledgers. A marked-up price on a shell depends on a completed benchmark that has not yet arrived. RICS cites IVS 410 to the effect that it is not appropriate to rely solely on projected costs and income in a project plan produced at the commencement of the project. The seller's price list is that plan. It is a forecast with a commercial author.
The allocator can apply a three-question test before any discount is booked as return. What is the completed value on current third-party evidence. What is the cost to complete from an independent source. What is the completion date, and what supports it. If any of the three is supplied by the seller alone, the discount is unverified. It may still be real, but it is not yet measured.
| Rung | Already spent | Who carries construction risk | What the discount pays for | Legal gate to read |
|---|---|---|---|---|
| Land | Title, location, permission. No structure. | Principal carries all of it, including permit risk | Permit, build-cost and time risk. Land is the residual item | Title and building approval (PBG in Indonesia). Escrow account before an off-plan sale in Dubai |
| Shell (rustico) | Foundations, frame, roof. Sunk, not resalable apart from the site | Principal, through the contractor and the developer as counterparty | Cost overrun, delay, counterparty risk. A low point value can sit below sums spent (RICS 8.4) | Escrow account and project funds (Dubai). Status of the construction contract |
| Turnkey | Services, finishes, external works | Largely resolved. Residual snagging and certification | Certification and handover timing | Completion certificate and 5% retention until one year after registration (Dubai). SLF (Indonesia) |
| Furnished | Fixtures, furniture, equipment | Supplier and operator, small | Replacement cost and wear, not structural value | Inventory list and handover protocol |
Spain's buyer guarantee as a comparator for Dubai and Bali
Spain shows how a legal system can attach a guarantee to each advance payment, and why the paper alone is not the protection. Law 57/1968 was repealed by Law 20/2015, which took effect on 1 January 2016, and the guarantee rules for off-plan housing now sit in an additional provision of Law 38/1999. The consolidated text of Law 38/1999 requires the developer to guarantee the refund of advance payments through surety insurance (seguro de caución) or a joint bank guarantee (aval solidario). We read the consolidated Spanish text published by the BOE, Spain's Official State Gazette, not an official translation.
The practical gap is issuance. A Spanish law firm reports that many losses in the 2008 to 2014 crisis came from buyers whose contracts referred to a guarantee that was never issued. The lesson for the principal is mechanical. Obtain the instrument itself, with the issuer, amount and trigger, and do not rely on the clause that promises it.
Spain and Dubai secure different things. Spain's model, as described, secures the buyer's claim to a refund if the project fails. Dubai's model secures the destination of the buyer's money while the project runs. Neither tells the principal that the building will be finished on time. Each leaves a different residual, and a principal should know which one a given contract has.
Where Bali sits in this comparison is an open question we do not claim to close. In the sources we reviewed we found no public statutory escrow or guarantee regime of the Dubai or Spanish type for Indonesian off-plan villa sales. Absence in our search is not absence in law. The question belongs with Indonesian counsel, and it should be asked before the first instalment.
Escrow secures where the money goes. It does not secure when the keys arrive.
Victaura Research
Honestly disclosed: where stage-of-completion pricing breaks
The first weakness is that the cost line is not independently verified for Bali. A guide dated August 2026 by Bukit Vista, a Bali villa-management firm, says it cannot verify a single Bali-wide price per square metre, and points to the Construction Cost Index 2025 of BPS-Statistics Indonesia Bali Province, released on 15 June 2026, as a comparison of relative price levels across regencies and not a villa cost. We therefore publish no per-square-metre figure.
The second weakness is that we found no rigorous estimate of the off-plan discount. Commercial sources circulate wide ranges and several are sales material. We could not trace any of them to disclosed data, and we use none. A reader who has seen a precise discount figure for a given market should ask for the transaction set behind it.
The third weakness is that the legal sources are secondary or translated. The Indonesian regime is read through a BPK legal note and the original, since amended, text of Law 1/2011. The Spanish regime is read in the consolidated Spanish text and a law-firm commentary. The Dubai statute is read in an English translation, and the Arabic text prevails in case of conflict. Nothing here is legal advice, and each point should be confirmed against the primary text by counsel.
The fourth weakness is that the four rungs are a construct. Real projects phase their buildings, a cluster may hold several rungs at once, and two villas on one plot can sit at different stages. The ladder also covers two contracts. A principal who buys a shell pays the cost to complete. A principal on a fixed-price off-plan contract does not, and meets cost overrun only through the developer's capacity to absorb it. The framework is a reading aid for risk. It is not a valuation, and RICS itself stresses that residual outputs vary widely with small input changes.
Reading a stage price as a principal
A principal reading a stage-of-completion price should rebuild it from four lines. Completed value on independent evidence. Cost to complete from a source that is not the seller. Time to completion with the date and its support. A risk margin that is stated explicitly. Whatever remains between the quote and that rebuild is either an unexplained discount or an unexplained premium, and both need a name before capital moves.
The second step is to ask which legal gate the project has passed. In Dubai that means the escrow account, the status of the completion certificate and the retention. In Indonesia it means the PBG and the SLF, and counsel's answer on whether any escrow or guarantee protects the instalments. In Spain it means an issued guarantee and not a promised one. The same discipline applies to conversions, where the completed benchmark is equally a forecast, as set out in the value-add underwrite of boutique conversions.
The third step is to treat the furnished rung as a consumable and the land rung as an option. Furnishings are priced at replacement cost less wear. Land carries the permit and the time. The shell rung holds most of the construction risk that the discount is meant to pay for, and the turnkey rung holds the residue in snagging and certification. That risk is the part a principal can check with an engineer, a contract and a certificate.
Skin in the game disclosure. Victaura, through its parent Greystone B.V. (Netherlands), develops projects on Lake Como (Italy), in Nungwi, Zanzibar (Tanzania), on Gili Air and in Uluwatu, Bali (Indonesia), and holds an off-plan capital position on Al Marjan Island, Ras Al Khaimah (UAE). Readers should assume commentary may be influenced by, or benefit, these positions. This document is classified as marketing material under MiFID II Article 24(3). It is not investment advice.
References
- Dubai Government, Law No. (8) of 2007 Concerning Escrow Accounts for Real Estate Development in the Emirate of Dubai (English translation)
- RICS, Valuation of development property, 1st edition 2019 (reissued as a professional standard 2023)
- BPK Perwakilan Provinsi Jawa Barat, Catatan Berita on PBG and Government Regulation 16 of 2021, September 2024
- IFRS Foundation, IFRS 15 Agenda Decisions, Revenue recognition in a real estate contract, IFRIC Update March 2018
- Cavendish Maxwell, Dubai Residential Market Performance H1 2025
- Finance Middle East, Dubai residential real estate sales jump 36% in H1, August 2025
- Gulf Construction Online, report on Cavendish Maxwell Dubai residential H1 2025, 6 August 2025
- Investortrust.id, Bank Indonesia Pertahankan BI Rate di 5,75% pada September 2026
- Bukit Vista, Villa construction costs 2026, August 2026
- BOE, Ley 38/1999 de Ordenación de la Edificación, consolidated text, additional provision one as worded by Ley 20/2015
- Costa Luz Lawyers, If a Spanish developer goes insolvent: what happens to off-plan buyers, 2026
- Pasal.id, Law 1/2011 on Housing and Settlement Areas, Article 42 (original text)
- Hukumonline, Pengamat nilai Permen PUPR soal PPJB seharusnya tak mengatur norma baru, 2019
- Dubai Land Department, Frequently asked questions, escrow account and technical report entries, accessed October 2026
- Bank Indonesia, News Release No. 28/193/DKom (23 September 2026)
The information on this website is provided for informational purposes only and does not constitute an offer, solicitation, or financial advice. Indicated returns are estimates and are not guaranteed; past performance is not indicative of future results. Capital invested is at risk.
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