Development finance for sites, builds and projects

What does development finance cover?

A property development has several phases, and each has different funding needs. Buying the site comes first. Then comes the approvals stage, which can take time and has its own costs. Construction follows, usually the largest part of the budget. Finally there is the completion and exit phase, where the project is sold, leased or refinanced.

Development finance can be arranged to cover all or part of these phases. Some lenders fund the land and the build together. Others fund only the land, and a second facility picks up construction. A short-term loan can hold a site while approvals are finalised.

Who is development finance for?

• Experienced developers with a pipeline of projects.
• Builders who want to develop for themselves rather than only for clients.
• Landowners who see potential in a site they already hold.
• First-time developers who have done the homework and have equity.
• Investors turning a single block into several dwellings or a mixed-use building.

What do development lenders look at?

Development lending is assessed more like a business plan than a household budget. Lenders typically want to see:

Area	What they are looking for
Feasibility	Realistic costs, realistic end values and a sensible margin
Site and approvals	Zoning, permits, planning status and any conditions
Builder and team	Licensed builder, contract type, consultants
Developer experience	Track record or a team that fills the gaps
Equity	The developer’s own contribution to the project
Exit	Sales, leasing, refinance or a combination

A quantity surveyor’s cost report and an independent valuation of the end product are common requirements. A thin feasibility, an inexperienced builder or an unclear exit are the usual reasons applications run into trouble.

What taxes and costs come with a development?

Besides construction costs, developers should budget for holding costs, consultants, council and authority fees, finance costs, legal work and marketing. Transfer duty on the site is set by each state and territory revenue office. GST affects developments in several ways, including whether sales are taxable and whether the margin scheme is used, and the ATO publishes guidance on GST and property. Your accountant should model these before you commit.

How does Ownright approach development finance?

Development is where lenders differ the most. Some love small residential subdivisions, some will only look at larger projects, and some are specialists in mixed-use or commercial builds. Ownright Custom Finance matches your project to the right group. Trevor Scott and the team have placed deals that other brokers found too hard, and we pay close attention to how funding is staged so cash flow holds up during construction.

For first-time developers, we spend time on the details that make lenders comfortable: the builder, the costings, the contingency and the exit. For experienced developers, we look at how to structure across projects so one does not choke the next. If you are weighing up a project, start a conversation with us before you exchange on the site if you can.

An illustrative example

Illustrative only, no real client. A landowner holds a corner site with approval for several townhouses. They have a licensed builder, a fixed-price contract and a quantity surveyor’s report. A lender could fund the build in stages against progress, with the existing land as part of the security and the developer’s own equity in the project. On completion the townhouses are sold and the loan repaid. If sales were slow, a refinance onto a longer-term loan might be the fallback. The lender will want to see that fallback documented from day one.

Common mistakes

• Using optimistic end values in the feasibility.
• Ignoring contingency for cost blowouts and delays.
• Signing a builder contract before understanding the lender’s requirements.
• Overlooking GST and duty in the cash plan.
• Having no plan for slow sales or a delayed lease-up.

Documents that help

• Feasibility study or budget
• Plans, permits and planning approvals
• Builder’s contract and licence details
• Quantity surveyor’s report
• Details of the developer’s equity and other assets
• Entity documents and track record, if any

How should I think about equity in a development?

Lenders expect developers to have skin in the game. Equity can take the form of cash, the value of land you already own, or other property offered as additional security. The mix affects how much cash you need to put in upfront and how exposed your other assets are. Using equity in a home or another investment can open a project, but it also ties those assets to the outcome, so it deserves careful thought and professional advice.

What does staged funding mean for cash flow?

Because funds are released against progress, you usually pay the builder’s early costs in sequence. Lenders typically release payments after an inspector confirms the stage, which means there can be a short gap between the work being done and the money arriving. A good funding plan allows for this gap and for the costs that sit outside the build contract, such as consultants, authority fees and holding costs. Projects rarely fail on the big numbers. They fail on the small ones that nobody planned for.

What happens when the build is finished?

Completion is the moment of truth. If you are selling, settlements start repaying the loan. If you are holding, a refinance onto longer-term terms takes over. In both cases, lenders and borrowers should have agreed what happens if sales are slower than hoped or valuations come in short. A common solution is to agree upfront how the facility will convert or extend, and we raise that early. Our guide on development finance for first-time developers goes through the full journey.

What do lenders think of joint ventures?

Many developments involve more than one party: a landowner and a developer, two investors or a builder and a financier. Lenders look carefully at who is responsible for what, who guarantees the loan and how profits and losses are shared. A clear written agreement makes a significant difference. Joint ventures can bring experience and capital that a single borrower lacks, but they also complicate the lender’s assessment, so the structure should be settled early with legal advice.

How do presales and pre-leasing affect funding?

For larger or apartment-style projects, lenders often like to see a proportion of presales before releasing construction funds. For commercial buildings, pre-leasing to quality tenants can serve a similar purpose. Smaller projects, such as a handful of townhouses held for rent or sold on completion, may not need presales with some lenders. Requirements vary, and the right choice depends on your strategy and the lender.

Can I develop in a regional area?

Yes, though lenders look closely at local demand, the buyer or tenant pool and the track record of the builder in that region. A small regional market may support fewer sales, so exit planning is especially important. We have arranged finance across the country, and we know which lenders are comfortable outside capital cities.

Next steps

If you are planning a development or have one that has stalled for lack of funding, talk to us about the project. It also helps to read our guide to development finance for first-time developers and our page on commercial construction loans.