1️⃣ What is Cost–Benefit Analysis?

Cost–Benefit Analysis (CBA) is a systematic economic evaluation method used to compare the total costs of a project with its total benefits, expressed in monetary terms.

It helps answer:

“Do the benefits of this project justify its costs?”

CBA is widely used in:

• Urban infrastructure projects
• Transport planning
• Environmental planning
• Public policy decisions
• Smart city and TOD projects

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2️⃣ Basic Principle of CBA

A project is considered acceptable if:$$Total\ Benefits > Total\ Costs$$Total Benefits>Total Costs

More formally:$$Net\ Benefit = Total\ Benefits – Total\ Costs$$Net Benefit=Total Benefits−Total Costs

If Net Benefit > 0 → Project is viable.

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3️⃣ Key Formulas in Cost–Benefit Analysis

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🔹 1. Net Present Value (NPV)

Since most planning projects occur over many years, future benefits and costs are discounted:$$NPV = \sum \frac{Benefits_t – Costs_t}{(1+r)^t}$$NPV=∑(1+r)tBenefitst​−Costst​​

Where:

• $r$r = discount rate
• $t$t = time period

If NPV > 0 → Accept the project.

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🔹 2. Benefit–Cost Ratio (BCR)

$$BCR = \frac{Present\ Value\ of\ Benefits}{Present\ Value\ of\ Costs}$$BCR=Present Value of CostsPresent Value of Benefits​

If:

• BCR > 1 → Accept
• BCR < 1 → Reject

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4️⃣ Steps in Conducting CBA for Planning Projects

1. Define project scope
2. Identify all costs
3. Identify all benefits
4. Convert benefits into monetary value
5. Discount future values
6. Compute NPV and BCR
7. Perform sensitivity analysis

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5️⃣ Types of Costs in Architecture & Planning

🔹 Direct Costs

• Land acquisition
• Construction cost
• Equipment
• Maintenance

🔹 Indirect Costs

• Environmental impact
• Traffic disruption during construction
• Social displacement

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6️⃣ Types of Benefits in Planning Projects

🔹 Financial Benefits

• Rental income
• Property value increase
• Parking revenue

🔹 Social Benefits

• Reduced travel time
• Improved safety
• Public health improvement

🔹 Environmental Benefits

• Reduced pollution
• Energy savings
• Carbon reduction

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7️⃣ Detailed Numerical Example

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✅ Example: Urban Flyover Project

Initial Construction Cost (Year 0)

₹10,00,00,000

Annual Benefits:

• Travel time savings = ₹2,00,00,000
• Fuel savings = ₹1,00,00,000
• Accident reduction benefit = ₹50,00,000

Total Annual Benefit = ₹3,50,00,000

Project Life = 5 years
Discount Rate = 10%

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Step 1: Calculate Present Value (PV) of Benefits

Using formula:$$PV = \frac{Benefit_t}{(1+r)^t}$$PV=(1+r)tBenefitt​​

Year 1:

$$\frac{3,50,00,000}{1.10} = 3,18,18,182$$1.103,50,00,000​=3,18,18,182

Year 2:

$$\frac{3,50,00,000}{1.10^2} = 2,89,25,620$$1.1023,50,00,000​=2,89,25,620

Year 3:

$$\frac{3,50,00,000}{1.10^3} = 2,62,96,927$$1.1033,50,00,000​=2,62,96,927

Year 4:

$$\frac{3,50,00,000}{1.10^4} = 2,39,06,297$$1.1043,50,00,000​=2,39,06,297

Year 5:

$$\frac{3,50,00,000}{1.10^5} = 2,17,33,907$$1.1053,50,00,000​=2,17,33,907

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Total Present Value of Benefits:

≈ ₹13,26,80,933

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Step 2: Calculate NPV

$$NPV = PV\ of\ Benefits – Initial\ Cost$$NPV=PV of Benefits−Initial Cost $$NPV = 13,26,80,933 – 10,00,00,000$$NPV=13,26,80,933−10,00,00,000 $$NPV = ₹3,26,80,933$$NPV=₹3,26,80,933

NPV is positive → Project is economically justified.

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Step 3: Benefit–Cost Ratio (BCR)

$$BCR = \frac{13,26,80,933}{10,00,00,000}$$BCR=10,00,00,00013,26,80,933​ $$BCR = 1.33$$BCR=1.33

Since BCR > 1 → Accept the project.

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8️⃣ Applications in Architecture & Urban Planning

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🔹 1. Transit-Oriented Development (TOD)

Used to evaluate:

• Increased land value
• Reduced travel time
• Environmental benefits

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🔹 2. Public Transport Projects

• Metro rail
• Bus Rapid Transit
• Multi-modal hubs

Evaluates:

• Time savings
• Fuel savings
• Reduced congestion

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🔹 3. Urban Redevelopment

• Brownfield redevelopment
• Slum rehabilitation
• Heritage conservation

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🔹 4. Environmental Infrastructure

• Stormwater management systems
• Solid waste management plants
• Solar energy installations

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9️⃣ Advantages of CBA

✔ Considers social and environmental benefits
✔ Suitable for public sector projects
✔ Helps in policy formulation
✔ Supports grant and funding approval
✔ Allows comparison of alternatives

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🔟 Limitations

❌ Difficult to monetize social benefits
❌ Sensitive to discount rate
❌ Long-term projections uncertain
❌ May ignore equity issues

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11️⃣ Difference Between ROI and CBA

ROI	CBA
Focus on financial profit	Includes social & environmental benefits
Used in private projects	Used in public projects
Simple calculation	More comprehensive
Short-term focus	Long-term societal focus

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12️⃣ Conclusion

Cost–Benefit Analysis is a crucial evaluation tool in architecture and urban planning. Unlike simple profitability measures, CBA:

• Incorporates social, environmental, and economic impacts
• Supports public infrastructure decisions
• Justifies large-scale urban investments
• Helps planners design economically sustainable cities

For planners, CBA ensures that projects create maximum societal benefit with minimum economic cost.