Daily writing prompt
Who are your favorite people to be around?
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
A project is considered acceptable if:Total Benefits>Total CostsTotal\ Benefits > Total\ CostsTotal Benefits>Total Costs
More formally:Net Benefit=Total Benefits−Total CostsNet\ Benefit = Total\ Benefits – Total\ CostsNet Benefit=Total Benefits−Total Costs
If Net Benefit > 0 → Project is viable.
🔹 1. Net Present Value (NPV)
Since most planning projects occur over many years, future benefits and costs are discounted:NPV=∑Benefitst−Costst(1+r)tNPV = \sum \frac{Benefits_t – Costs_t}{(1+r)^t}NPV=∑(1+r)tBenefitst−Costst
Where:
rrr = discount rate
ttt = time period
If NPV > 0 → Accept the project.
🔹 2. Benefit–Cost Ratio (BCR)
BCR=Present Value of BenefitsPresent Value of CostsBCR = \frac{Present\ Value\ of\ Benefits}{Present\ Value\ of\ Costs}BCR=Present Value of CostsPresent Value of Benefits
If:
BCR > 1 → Accept
BCR < 1 → Reject
Define project scope
Identify all costs
Identify all benefits
Convert benefits into monetary value
Discount future values
Compute NPV and BCR
Perform sensitivity analysis
🔹 Direct Costs
Land acquisition
Construction cost
Equipment
Maintenance
🔹 Indirect Costs
Environmental impact
Traffic disruption during construction
Social displacement
🔹 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
✅ 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 yearsDiscount Rate = 10%
Step 1: Calculate Present Value (PV) of Benefits
Using formula:PV=Benefitt(1+r)tPV = \frac{Benefit_t}{(1+r)^t}PV=(1+r)tBenefitt
Year 1:
3,50,00,0001.10=3,18,18,182\frac{3,50,00,000}{1.10} = 3,18,18,1821.103,50,00,000=3,18,18,182
Year 2:
3,50,00,0001.102=2,89,25,620\frac{3,50,00,000}{1.10^2} = 2,89,25,6201.1023,50,00,000=2,89,25,620
Year 3:
3,50,00,0001.103=2,62,96,927\frac{3,50,00,000}{1.10^3} = 2,62,96,9271.1033,50,00,000=2,62,96,927
Year 4:
3,50,00,0001.104=2,39,06,297\frac{3,50,00,000}{1.10^4} = 2,39,06,2971.1043,50,00,000=2,39,06,297
Year 5:
3,50,00,0001.105=2,17,33,907\frac{3,50,00,000}{1.10^5} = 2,17,33,9071.1053,50,00,000=2,17,33,907
Total Present Value of Benefits:
≈ ₹13,26,80,933
Step 2: Calculate NPV
NPV=PV of Benefits−Initial CostNPV = PV\ of\ Benefits – Initial\ CostNPV=PV of Benefits−Initial Cost NPV=13,26,80,933−10,00,00,000NPV = 13,26,80,933 – 10,00,00,000NPV=13,26,80,933−10,00,00,000 NPV=₹3,26,80,933NPV = ₹3,26,80,933NPV=₹3,26,80,933
NPV is positive → Project is economically justified.
Step 3: Benefit–Cost Ratio (BCR)
BCR=13,26,80,93310,00,00,000BCR = \frac{13,26,80,933}{10,00,00,000}BCR=10,00,00,00013,26,80,933 BCR=1.33BCR = 1.33BCR=1.33
Since BCR > 1 → Accept the project.
🔹 1. Transit-Oriented Development (TOD)
Used to evaluate:
Increased land value
Reduced travel time
Environmental benefits
🔹 2. Public Transport Projects
Metro rail
Bus Rapid Transit
Multi-modal hubs
Evaluates:
Time savings
Fuel savings
Reduced congestion
🔹 3. Urban Redevelopment
Brownfield redevelopment
Slum rehabilitation
Heritage conservation
🔹 4. Environmental Infrastructure
Stormwater management systems
Solid waste management plants
Solar energy installations
✔ Considers social and environmental benefits✔ Suitable for public sector projects✔ Helps in policy formulation✔ Supports grant and funding approval✔ Allows comparison of alternatives
❌ Difficult to monetize social benefits❌ Sensitive to discount rate❌ Long-term projections uncertain❌ May ignore equity issues
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.
