Property Development Finance Guide

Development finance encompasses the funding required to acquire land and complete property development projects. This capital may come from a single lender or combine contributions from multiple sources. Combined with the developer's own equity, development finance enables land acquisition, professional fees, construction costs, project management expenses, and holding costs.

Development loans differ from standard property mortgages in several ways: term length is typically 12-24 months aligned with project completion, interest is capitalised within the facility rather than paid monthly, and funding is determined by professional valuation of both existing land and proposed completed development.

Developers typically contribute 20-40% of project costs as equity. Bank lenders often require 30-40% for speculative projects. Non-bank lenders may accept 20-30% with strong pre-sales. Some structures allow equity to be contributed through land value rather than cash. Mezzanine finance can supplement equity for larger projects.

Each lender has distinct preferences regarding borrower profiles, project types, and geographic areas. Major banks suit established developers with strong track records and pre-sales. Non-bank lenders accommodate first-time developers and projects without pre-sales. Private lenders offer flexibility for complex or time-sensitive transactions. A specialist broker identifies lenders actively seeking projects matching yours.

Lenders require detailed feasibility analysis demonstrating minimum 15-20% Return on Cost. Include all hard and soft costs, realistic sales assumptions based on comparable evidence, and sensitivity testing. Your feasibility should show the project remains viable with 10% cost increases, 10% revenue decreases, and 6-month delays.