Project costs
Land, construction, professional fees, finance costs, statutory costs, contingencies and other project expenses.
Business & Commercial
Property Development Finance
Development finance is structured around the project as well as the borrower — including site value, development costs, expected end value, experience, presales where required and the strategy for repaying the facility.
Short answer
A development lender will generally want to understand how much the project will cost, what it is expected to be worth on completion, how much equity is being contributed, whether presales are required, how experienced the project team is and how the debt will be repaid.
At a glance
Gross realisation value
GRV is the estimated total value of the completed project and can be an important lender measure.
Loan to cost
LTC compares the proposed debt with the recognised development cost. Lender definitions and inclusions can vary.
Exit strategy
Repayment may rely on completed-property sales, refinance into longer-term debt or another clearly supportable exit.
What development finance can cover
Development finance may be used for projects ranging from smaller townhouse or duplex developments through to larger residential, mixed-use or commercial projects. The appropriate structure depends on the scale of the development, the borrower and project entity, the site, approvals, construction arrangements and the proposed exit.
How lenders assess a project
Lenders can assess development transactions using a combination of measures rather than a single standard home-loan LVR. Common considerations include the current site value, total development cost, gross realisation value, loan-to-cost position, borrower equity, presales, development and construction experience, builder strength, planning approvals, feasibility and contingency.
Presales and lender policy
Some lenders require a minimum level of qualifying presales before funding or before later stages of the facility are available. Other lenders may accept lower presales or different exit strategies depending on the project, leverage and borrower strength. Presale requirements are lender-specific and can change.
Interest, fees and contingency
Development facilities can involve capitalised interest, establishment or risk fees, valuation and quantity-surveyor costs, legal fees and other finance expenses. It is important to consider the full funding requirement and allow for delays or cost increases rather than focusing only on the quoted interest rate.
The exit strategy matters from the beginning
A lender will generally want a credible pathway to repayment. That may be settlement of completed sales, refinance into investment or commercial debt, or another acceptable strategy. The finance structure should be considered alongside the likely timing of construction, completion, sales and settlement.
How I can help
I can help organise the finance request so lenders can understand the project clearly, identify suitable lender options, compare key terms and costs, and work through the information typically required for assessment.
Discuss the project
The earlier the funding structure is considered, the easier it is to identify potential issues.
This website provides general information only and does not take into account your personal circumstances. Credit assistance is subject to individual assessment, lender criteria and applicable credit laws. Valuations, presales, GRV, LTC and development funding requirements vary by lender and transaction. Taxation, legal, planning, financial-planning and other specialist matters should be discussed with appropriately qualified professionals.