Getting Services to a Plot: A Worked Example of the Connection Cost

An illustrative calculation showing how power, water and drainage connections change the land price you can afford to pay for an unserviced plot.

An unserviced plot is cheaper for a reason. Bringing electricity at the capacity a building needs, water, and a drainage solution can absorb the entire discount, and the work often has to happen before construction can proceed usefully. This worked example shows how to move the connection question from a vague worry into a number that adjusts the land price you are willing to pay.

The situation

An overseas owner is comparing two residential plots of the same permitted area in the same city. Plot A sits inside a fully serviced district and is priced higher. Plot B sits at the edge of the built area, is priced lower, and has a power line and a water main in a street some distance away with no drainage network reaching it. The owner wants to know which plot is genuinely cheaper once the plot is ready to build on.

Assumptions (illustrative)

• Both plots: 900 square metres, same permitted envelope, same scheme of 12 apartments.
• Plot A asking price: SAR 2,700,000, services available at the boundary.
• Plot B asking price: SAR 1,980,000, no services at the boundary.
• Illustrative extension of power to Plot B at the required capacity: SAR 260,000.
• Illustrative water main extension and connection for Plot B: SAR 140,000.
• Illustrative on-plot drainage solution for Plot B pending a network: SAR 180,000.

Step 1: Total the enabling works on Plot B

Power 260,000 plus water 140,000 plus drainage 180,000 equals SAR 580,000 of enabling works.

The headline saving on Plot B is 2,700,000 less 1,980,000, which is SAR 720,000. Against that sits SAR 580,000 of work that produces no saleable area at all. The apparent discount has shrunk to SAR 140,000 before anything else is considered.

Step 2: Add the cost of time

Assume enabling works delay the construction start by 5 months. Finance on SAR 1,980,000 of land at an illustrative 7% annual cost gives 1,980,000 times 0.07 times 5 divided by 12, which is SAR 57,750.

Money tied up in land that cannot yet be built on is a real cost, whether it is borrowed or your own. Five months of carry on the land alone consumes another SAR 57,750, leaving roughly SAR 82,250 of the original discount.

Step 3: Add the professional and application costs

Utility applications, an infrastructure design input and a survey of the route, taken together at an illustrative SAR 45,000.

Enabling works need drawings, applications and coordination, and those are separate from the physical cost. The remaining advantage of Plot B is now about SAR 37,250 on a project of this size, which is inside the margin of error of every other assumption.

Step 4: Test the risk that the drainage solution is temporary

If a network arrives later and connection plus decommissioning of the interim solution costs an illustrative SAR 90,000, then 90,000 less 37,250 leaves Plot B SAR 52,750 worse off.

An interim solution can become a second cost rather than a saving. When the long-term infrastructure position is uncertain, the honest appraisal carries a provision for the second connection instead of assuming it never happens.

Step 5: Convert the answer into a land price

For Plot B to match Plot A on a like for like basis: 2,700,000 less 580,000 less 57,750 less 45,000 equals SAR 2,017,250, and lower still if the drainage risk is carried.

This is the number to negotiate with. You are not arguing about whether the plot is good, you are showing what it costs to make it buildable, and asking the price to reflect it.

Step 6: Check the effect on the project margin

On a scheme with an illustrative total development cost of SAR 9,000,000, the SAR 682,750 of enabling and carrying cost on Plot B is about 7.6% of cost.

Seven and a half per cent of total cost is the size of a normal developer profit margin. An enabling works package of this scale is not a detail in the budget, it is a decision about whether the project works.

What changes the answer

• The required electrical capacity, since a larger unit count or a commercial element can move the connection into a different category of work.
• Distance to the nearest adequate main, because most extension cost is length dependent.
• Whether a drainage network is planned for the area, which decides if the on-plot solution is interim or permanent.
• Ground conditions along the route, because rock or high groundwater changes excavation cost.
• How long the applications take, which lengthens the period of carrying cost on the land.

What the numbers tell you

• The discount on an unserviced plot is a quotation for work, not a saving.
• Ask what capacity your scheme needs before pricing any connection, because capacity drives the category of work.
• Carrying cost on land that cannot be built on belongs in the comparison, even for a cash buyer.
• An interim utility solution should be appraised as two costs until a permanent network is confirmed.
• Turn the analysis into a target land price, so the negotiation is about evidence rather than opinion.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

Domira designs, builds and manages projects across Saudi Arabia for owners who are based abroad: land appraisal, feasibility, design, construction, handover and asset management under one accountable contract. Send us the plot or the brief and Domira will put the numbers in front of you before you commit.