📘 What is Budget Overrun?

A budget overrun, also known as a cost overrun, occurs when the actual expenses of a real estate project exceed the initial estimated budget. It often indicates a gap in cost forecasting, project planning, or execution.

Budget overruns can impact profitability, timelines, and the financial viability of real estate investments, especially for developments or renovations.

📌 When and Why It’s Used

The term is used during or after a project to assess how closely the actual costs align with projected figures. Recognizing a budget overrun is critical for investors and developers to take corrective actions, reallocate funds, or even pause projects if necessary.

It also plays a role in learning from past financial missteps and refining future project budgets.

To calculate a budget overrun, you subtract the original budget from the actual costs. This difference can be expressed as a raw dollar amount or as a percentage overrun to assess the scale of deviation.

The formula is straightforward and helps in monitoring project health in real time or during post-project analysis.

✅ Pros

• Helps identify inefficiencies in budgeting or project planning
  
• Encourages better forecasting in future projects
  
• Useful for assessing contractor performance and vendor accountability
  

⚠️ Cons

• Reduces profitability and may jeopardize returns
  
• Can delay project timelines or financing schedules
  
• May indicate poor planning, requiring reputation or trust repair