1️⃣ Meaning of Return on Investment (ROI)

Return on Investment (ROI) is a financial performance measure used to evaluate the profitability of an investment relative to its cost.

It answers the fundamental question:

“How much profit is generated from the money invested?”

ROI is widely used in:

• Real estate development
• Urban infrastructure projects
• Sustainable building design
• PPP (Public–Private Partnership) projects
• Redevelopment schemes

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2️⃣ Formula of ROI

$$ROI (\%) = \frac{Net\ Profit}{Initial\ Investment} \times 100$$ROI(%)=Initial InvestmentNet Profit​×100

Where:$$Net\ Profit = Total\ Return – Initial\ Investment$$Net Profit=Total Return−Initial Investment

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3️⃣ Interpretation of ROI

• ROI > 0 → Project generates profit
• Higher ROI → Better investment
• ROI = 20% → ₹20 profit for every ₹100 invested
• ROI < 0 → Project incurs loss

ROI is expressed as a percentage, making it easy to compare different projects.

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4️⃣ Importance of ROI in Architecture & Planning

ROI connects design decisions with financial feasibility. It helps:

• Developers assess project viability
• Planners compare alternative land-use options
• Investors evaluate profitability
• Government agencies justify investments
• Architects propose cost-effective design solutions

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5️⃣ Where ROI is Used in Planning Projects

🔹 1. Real Estate Development

• Residential apartments
• Commercial complexes
• Mixed-use developments

🔹 2. Infrastructure Projects

• Parking structures
• Bus terminals
• Metro station commercial spaces

🔹 3. Sustainable Design Decisions

• Solar panels
• Green roofing
• Energy-efficient façades

🔹 4. Urban Redevelopment

• Brownfield redevelopment
• Transit-oriented development
• Smart city projects

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6️⃣ Step-by-Step Calculation of ROI

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✅ Example 1: Residential Project

Initial Investment:

• Land = ₹40,00,000
• Construction = ₹50,00,000
• Other expenses = ₹10,00,000

Total Investment = ₹1,00,00,000

Total Sales Revenue = ₹1,25,00,000

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Step 1: Calculate Net Profit

$$Net\ Profit = 1,25,00,000 – 1,00,00,000$$Net Profit=1,25,00,000−1,00,00,000 $$= ₹25,00,000$$=₹25,00,000

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Step 2: Calculate ROI

$$ROI = \frac{25,00,000}{1,00,00,000} \times 100$$ROI=1,00,00,00025,00,000​×100 $$ROI = 25\%$$ROI=25%

👉 Interpretation: The project earns 25% return on invested capital.

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✅ Example 2: Solar Panel Installation

Installation Cost = ₹5,00,000

Total Savings over 5 years = ₹6,20,000

Net Profit:$$6,20,000 – 5,00,000 = ₹1,20,000$$6,20,000−5,00,000=₹1,20,000 $$ROI = \frac{1,20,000}{5,00,000} \times 100$$ROI=5,00,0001,20,000​×100 $$ROI = 24\%$$ROI=24%

👉 Sustainable investment is financially viable.

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✅ Example 3: Urban Parking Facility

Investment = ₹2,50,00,000

Total Revenue over 5 years = ₹2,75,00,000

Net Profit:$$2,75,00,000 – 2,50,00,000 = ₹25,00,000$$2,75,00,000−2,50,00,000=₹25,00,000 $$ROI = \frac{25,00,000}{2,50,00,000} \times 100$$ROI=2,50,00,00025,00,000​×100 $$ROI = 10\%$$ROI=10%

👉 Moderate return; compare with alternative land use.

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7️⃣ Advantages of ROI

✔ Simple to calculate
✔ Easy to understand
✔ Useful for comparing alternatives
✔ Helpful in early-stage feasibility studies
✔ Widely accepted by investors

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8️⃣ Limitations of ROI

❌ Ignores time value of money
❌ Does not consider risk
❌ Not suitable alone for long-term public projects
❌ Does not include social and environmental benefits

Therefore, ROI is often combined with:

• Net Present Value (NPV)
• Internal Rate of Return (IRR)
• Cost–Benefit Analysis (CBA)

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9️⃣ ROI in Planning Decision-Making

In architecture and urban planning, ROI helps in:

• Evaluating density options
• Comparing building materials
• Assessing TOD commercial potential
• Estimating feasibility of PPP projects
• Supporting Detailed Project Reports (DPR)

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🔟 Conclusion

Return on Investment (ROI) is a fundamental financial tool that links architectural design and urban planning decisions with economic feasibility. It provides a clear, percentage-based measure of profitability, helping planners and architects ensure that projects are not only technically sound but also financially sustainable.