Projector based augmented reality serves as an alternate visual guidance tool for surgeons when performing complicated open surgeries. In projector based augmented reality, image overlay projection is a technique that allows the surgeon to view the underlying anatomical information such as tissues, tumors etc. directly on the surface of the organ or the patient. This will provide an intuitive view of the surgical navigation data by combining the surgeon’s real world view with the preoperative three dimensional virtual models or instructions. Thus the strain on the surgeon to mentally align and visualize the preoperative data with intraoperative scene is greatly reduced. There are multiple stationary and handheld projectors available in the market today for this purpose. During surgery, stationary projectors mounted on a rack or under the ceiling suffer from a loss of adjustability and further cause shadowing issues when the surgeon occludes the scene. Although hand-held projectors do not have these disadvantages, they have major problems in terms of illuminance and luminous flux. The amount of light at which the hand-held projectors can project virtual additional information on to the patient is very low especially when the surgical lights are switched on. This paper therefore aims to provide an analysis of the requirements for designing such a special hand-held, augmented reality projector system that could be used during surgery, through a user study. Various optical parameters which are a key to design an augmented reality projector such as illuminance, luminance, luminous flux etc. are measured. Apart from that, other parameters such as refresh rate, image size, resolution which are also some important criteria in designing such a special projector, are discussed in this paper with respect to our application.