A composite case: a disused shed in a semi-central area, bought for a nine-storey residential scheme under the permit route then in common use. After 2024, an implementation plan, new monetisation tables and longer timelines rewrite the appraisal. Where the loss comes from and why alternative designs land on almost the same number.
This composite case draws on demolition-and-rebuild schemes launched in Milan between 2018 and 2023, with rounded values for a semi-central area and no reference to a real site.
The purchase
At the end of 2019 a developer buys a plot of about 3,000 square metres with a disused single-storey workshop. The plan is to demolish it and build a nine-storey residential block of 6,000 square metres of gross floor area. The permit route is the one then in common use: renovation recovering existing volume, a certified notice of works, standards monetised on city tables.
The price rests on a residual valuation: revenue €31.7 million (6,600 saleable square metres at €4,800); construction and demolition €12 million; soft and finance costs €3.8 million; charges and levy €1.5 million; standards monetisation €0.48 million on 1,600 square metres at €300; a 15% margin of €4.75 million. Just over €9 million is left for the land. The company pays €8.4 million, 60% financed by a bank with a mortgage on the plot.
The pandemic and material costs delay everything. The application is ready at the end of 2023.
The rules change
In January 2024 the first preliminary-judge ruling on another site opens the season of investigations; on 23 February the city adopts guidelines reflecting the strict interpretation, and in the same year it changes how monetisation is calculated. For nine storeys replacing one, the route becomes an implementation plan with an agreement.
The project remains possible, but it is now new construction, standards apply to the whole proposed floor area, and the plan must go through adoption, observations and approval before any permit.
The 2026 recalculation
The market has meanwhile helped the developer. New homes in the area sell at about €6,300 and expected revenue rises to €41.6 million. Construction and demolition cost €15.8 million, ancillary costs €5 million, charges €1.8 million.
The decisive line is another. As new construction, the scheme must provide about 5,400 square metres of public services. Monetised at €950, an average of the new tables for this type of area, they cost €5.1 million: ten times the 2019 figure.
Then there is time. Review, adoption and approval realistically take two and a half years before a permit, with about €1 million of holding costs in interest and property tax. A riskier scheme also needs a higher margin, at least 17% for today's lenders, i.e. €7.1 million.
The new residual value falls to about €5.7 million.
The alternative route
The company can give up height and stay within a strict renovation, keeping shape and volume close to the existing building. Floor area drops to about 3,200 square metres in low-rise blocks: no implementation plan, limited standards, short timelines. With higher unit costs, revenue of €22.2 million and a 15% margin, the residual value is around €5.9 million.
The two routes land on almost the same number.
After 2024 the land value is set by the new framework of costs and procedures, whatever design is chosen. The choice is about risk: the tower keeps floor area and uncertainty, the low-rise option gives up half the space for predictable timing. There is also a negotiating lever: part of the standards can be provided in kind, such as a square or green area on the plot, or built as works offset against charges. Every 1,000 square metres ceded rather than monetised saves almost €1 million, at the cost of a smaller plot and longer negotiations.
The collateral
For the bank, debt of about €5 million, originally 60% of collateral value, now exceeds 85%. After six years of interest and no revenue, the company has little room to recapitalise. A performing loan thus slides towards unlikely-to-pay without a single missed instalment.
Where the loss came from
Higher revenue, almost €10 million, absorbs the increase in construction and ancillary costs, about €5.3 million, and leaves a positive balance. Value is eroded by three items: €4.6 million of extra monetisation, €2.35 million of additional margin, €1 million of time.
A site bought in those years embedded an administrative practice as if it were a building right, and the correction arrived all at once, without passing through house prices.