Construction Finance for Property Developers: Complete Australia Guide 2025

Property developers seeking construction finance in Australia may face significantly different lending criteria, approval processes, and funding structures compared to homeowners building their own residences. With development projects typically ranging from $1 million to $25 million or more, understanding how lenders assess commercial development proposals, calculate loan-to-value ratios, and structure progressive drawdowns could mean the difference between securing favourable terms and compromising project feasibility.

This comprehensive guide explores construction finance specifically from a property developer’s perspective, covering everything from lender selection and presales requirements through to exit strategies and state-specific considerations. Whether you’re developing townhouses, apartment buildings, commercial properties, or mixed-use projects, understanding the financing landscape may help you optimise your capital structure and improve project returns.

Understanding Construction Finance vs Construction Loans

The distinction between construction finance for developers and construction loans for homeowners is typically more than semantic—it represents fundamentally different products with distinct risk profiles, approval criteria, and commercial terms.

Key Differences That May Impact Your Project

Purpose and intent generally form the primary distinction. Construction loans typically serve owner-occupiers building a single dwelling they intend to live in, whilst construction finance usually supports developers building properties for sale or investment. This difference in intent may influence how lenders assess risk, structure facilities, and price their products.

Project scale and complexity often vary dramatically. Where construction loans might finance projects valued at $300,000 to $800,000, construction finance facilities commonly range from $1 million to $25 million or beyond. Multi-unit developments, commercial buildings, and mixed-use projects typically require more sophisticated financial structures and greater lender expertise than single-dwelling construction.

Loan-to-value ratios (LVR) may differ substantially between the two products. Homeowner construction loans often reach 80-95% LVR with lenders mortgage insurance, whilst development finance typically sits at 60-80% LVR depending on project characteristics and developer experience. This means developers generally require more equity contribution relative to total development costs.

Presales requirements represent perhaps the most significant practical difference. Major banks providing construction finance for residential developments commonly require qualifying presales covering 70-100% of the debt facility, whilst construction loans for homeowners typically require no presales. This requirement fundamentally shapes development timelines and marketing strategies.

Interest rate structures usually reflect different risk assessments. Construction loans for owner-occupiers might attract rates of 6.00-7.50% per annum, whilst development finance rates typically range from 7.00-16.00% per annum depending on lender type, project risk, and developer track record. The rate differential may reflect the speculative nature of for-sale developments versus the security of owner-occupation.

Exit strategies diverge considerably. Construction loans generally convert to standard residential mortgages upon completion, whilst development finance requires deliberate exit planning—whether through progressive settlements as units sell, refinancing to investment loans, or full facility repayment from project proceeds.

Why This Distinction Matters for Feasibility

Understanding these differences is typically crucial when modelling development feasibility. A project viable at homeowner construction loan rates may become marginal at development finance rates. Similarly, presales requirements may affect your sales strategy, pricing assumptions, and project timeline—all of which could impact your return on cost calculations.

When modelling your development feasibility, accurate financing cost assumptions based on appropriate lender types and realistic debt structures may significantly improve the reliability of your return projections.

Types of Construction Finance Lenders in Australia

The Australian construction finance market generally comprises three main lender categories, each serving different developer needs and project characteristics. Understanding which lender type may best suit your circumstances could save significant time and potentially improve your financing terms.

Major Banks: Competitive Rates With Strict Criteria

Australia’s major banks—including Commonwealth Bank, NAB, Westpac, and ANZ—typically offer the most competitive construction finance rates but maintain stringent lending criteria shaped by regulatory requirements.

Typical characteristics of major bank facilities may include:

• Interest rates ranging from 5.00-7.50% per annum, amongst the lowest available for development finance
• LVR limits typically capped at 60-70% of Total Development Costs (TDC) or 65% of Gross Realisation Value (GRV)
• Presales requirements commonly demanding 70-100% of debt covered by qualifying contracts
• Approval timelines often extending 8-12 weeks or longer due to comprehensive credit assessment
• Strong preference for experienced developers with proven track records on similar-scale projects
• Rigorous feasibility assessment including market analysis, cost verification, and end value validation

Following APRA’s 2017 lending restrictions, major banks tightened development lending criteria significantly. This regulatory environment means banks may decline projects that alternative lenders would approve, particularly for first-time developers or projects with limited presales.

When major banks may suit your project: If you’re an experienced developer with strong presales (typically 70%+ of units under contract), adequate equity (30-40% of TDC), and time to navigate a thorough approval process, major banks could offer the most cost-effective financing. Projects with conservative feasibility assumptions and strong market fundamentals generally perform best in bank credit assessments.

Non-Bank Specialist Lenders: Flexibility at Moderate Premiums

Non-bank lenders such as Assured Management, Diverse Funding Solutions, and numerous smaller specialists typically occupy the middle ground between major banks and private lenders. These organisations often provide greater flexibility whilst maintaining professional standards and reasonable pricing.

Common features of non-bank construction finance may include:

• Interest rates typically ranging from 8.00-11.95% per annum, representing a premium over major banks but with more flexible terms
• LVR facilities commonly reaching 65-75% of TDC or 70% of GRV, potentially requiring less equity than major banks
• Reduced presales requirements, often 30-50% of units under contract or sometimes no presales for certain project types
• Faster approval processes, potentially 4-6 weeks from application to approval compared to bank timelines
• More accommodating assessment of first-time developers, particularly where projects demonstrate strong fundamentals
• Willingness to consider projects banks may decline, including those with tighter feasibility margins or non-traditional formats

Non-bank lenders typically fund their facilities through institutional capital, securitisation, or warehouse lines from major banks. This funding structure allows them to maintain competitive pricing whilst offering more flexible credit policies than their bank funders.

When non-banks may suit your project: Developers who need faster approvals, have strong feasibility but limited presales, or lack extensive development track records may find non-bank lenders provide an optimal balance of cost and accessibility. Projects that fall slightly outside major bank criteria—perhaps due to tighter margins, innovative formats, or less established locations—often find suitable homes with non-bank specialists.

Private Lenders: Speed and Certainty at Premium Pricing

Private lenders and boutique finance providers typically offer the most flexible construction finance options, with approval decisions driven primarily by security value and exit strategy rather than developer experience or presales. This flexibility generally comes at a significant cost premium.

Typical characteristics of private construction finance may include:

• Interest rates commonly ranging from 10.75-16.00% per annum or higher, reflecting risk-based pricing and alternative capital costs
• LVR facilities potentially reaching 75-85% of TDC or GRV, sometimes extending higher for projects with exceptional security
• Minimal or zero presales requirements, enabling projects to commence construction before any marketing begins
• Rapid approval timelines, potentially 2-3 weeks from application to settlement in straightforward cases
• Acceptance of first-time developers where project fundamentals are sound and exit strategy is clear
• Willingness to provide mezzanine finance (second-position debt) sitting behind senior bank facilities

Private lenders source capital from high-net-worth individuals, family offices, and private investment funds seeking higher returns than traditional fixed income. This capital structure allows flexibility but necessitates higher pricing to compensate investors for increased risk and illiquidity.

When private lenders may suit your project: Time-sensitive opportunities where faster settlement enables better land pricing, projects with strong fundamentals but no presales, or developments requiring additional leverage beyond what banks or non-banks will provide may warrant private finance despite higher costs. Experienced developers might use private finance strategically—paying premium rates for 12-18 months to avoid presales discounts and sell completed product at higher prices, potentially improving overall returns despite higher interest costs.

Mezzanine Finance: Filling the Gap

Mezzanine finance represents second-position debt sitting behind senior construction facilities, typically used to reduce equity requirements or increase development capacity. This form of finance generally attracts interest rates of 16-20% per annum plus equity participation or profit share arrangements.

Developers might structure funding stacks combining 65% senior debt (bank or non-bank), 15-20% mezzanine finance, and 15-20% equity to maximise leverage and potential returns. However, the complexity and cost of mezzanine structures typically suit only larger developments where the improved returns justify the additional financing costs and complexity.

How Lenders Calculate LVR for Development Projects

Loan-to-value ratio calculations for construction finance may follow different methodologies than standard property lending, and understanding these approaches could reveal opportunities to optimise your equity requirements.

Total Development Cost (TDC) vs Gross Realisation Value (GRV)

Lenders typically assess construction finance facilities using one of two primary methodologies, each producing different equity requirements for the same project.

Total Development Cost (TDC) methodology calculates LVR as a percentage of all project costs, commonly including:

• Land acquisition cost (including stamp duty and acquisition costs)
• Construction costs (including builder margin and contingencies)
• Professional fees (architect, engineer, surveyor, town planner, lawyers)
• Finance costs (interest, establishment fees, legal costs)
• Development contributions and authority charges
• Holding costs and project management

A lender offering 80% LVR on TDC basis would advance $4 million against a project with $5 million total costs, requiring $1 million developer equity (20%).

Gross Realisation Value (GRV) methodology instead calculates LVR as a percentage of anticipated end sale values, typically the sum of all unit sale prices at current market values. A lender offering 65% LVR on GRV basis would advance $4.55 million against a project with $7 million anticipated sales, requiring the developer to cover the shortfall between loan advance and total costs.

Why GRV Methodology May Require Less Equity

Counter-intuitively, a lower percentage LVR on GRV basis often requires less equity than a higher percentage on TDC basis. Consider a development with $5 million TDC and $7 million GRV (representing 40% gross margin):

The GRV approach, despite the lower percentage, may advance more funds because it’s calculated against the higher end value figure. This can significantly reduce equity requirements, particularly for projects with strong feasibility margins.

Lenders using GRV methodology typically discount sale prices by 10-20% for risk buffer, and some apply “as if complete” valuations considering current market conditions rather than future projections. Understanding these adjustments may help you anticipate actual available debt rather than being surprised during formal assessment.

Practical Implications for Your Development

When approaching lenders, clarifying their LVR methodology early may help you accurately forecast equity requirements. Some developers find that non-bank lenders using GRV methodology require less equity than major banks using TDC methodology, despite the former charging higher interest rates. Running scenarios under both methodologies during feasibility assessment could reveal your optimal financing structure.

Presales Requirements and Strategic Considerations

The presales requirement represents one of the most significant structural differences between major bank and alternative construction finance, fundamentally shaping development strategy and timeline.

What Constitutes a “Qualifying” Presale

Major banks assessing presales for construction finance approval typically apply strict qualification criteria. Generally, only contracts meeting all of the following conditions may count toward presales requirements:

Unconditional status: The contract must have passed all subject-to clauses including finance, building and pest inspection, strata review, and any other conditions. Subject-to contracts, even with deposits held, commonly don’t qualify.

Substantial deposit: Most banks require 10% deposit paid and held in trust, with some requiring the full deposit (often 10% at contract and 5% at completion) before counting the presale. Smaller deposits may not meet bank criteria.

Genuine purchaser limits: Banks typically limit how many units any single purchaser can contract, commonly maximum 2 units per buyer. This prevents developers from “stacking” presales with few purchasers who might collectively default.

Foreign buyer restrictions: Some banks limit the percentage of foreign purchasers (commonly 20-30% maximum) due to perceived higher settlement risk and FIRB approval requirements.

Settlement timeframe: Banks may require settlements to occur within specific timeframes post-completion, typically 3-6 months maximum, to ensure quick debt repayment.

Deposit security: The deposit must be held appropriately—either in statutory trust or under bank-controlled deposit bond arrangements.

The 70% Presales Challenge

Post-APRA restrictions, major banks commonly require presales covering 70-100% of the debt facility (not 70% of all units). For a project with $4 million debt facility and $7 million total sales, 70% debt coverage means approximately $2.8 million in qualifying presales—roughly 40% of units by value.

However, achieving even this level of presales may present challenges:

Marketing and pricing pressure: Selling off-plan typically requires 10-15% discounts compared to completed product pricing. These discounts directly reduce your GRV and may impact feasibility margins.

Timeline implications: Achieving substantial presales might take 6-12 months depending on market conditions and project characteristics. This delays construction commencement and extends the project timeline, increasing holding costs.

Buyer cooling-off risks: Some jurisdictions provide cooling-off periods even after contracts exchange. In NSW, buyers have 5 business days to rescind with 0.25% penalty, potentially creating presales volatility.

Market timing risk: Locking in sale prices 18-24 months before settlement means you’re committed to those prices regardless of market movements, potentially missing upside in rising markets or facing margin compression in falling markets.

Alternative Strategies: Building Without Presales

Non-bank and private lenders offering construction finance with minimal or zero presales requirements may enable different development strategies:

Build and sell completed product: Avoiding presales allows you to sell finished units at full market value without off-plan discounts. If you can achieve 10-15% higher prices on completed product, the additional interest costs from more expensive finance might be offset by improved sales revenue.

Market timing flexibility: Without presales commitments, you maintain flexibility to adjust pricing based on market conditions, potentially capturing upside in strengthening markets.

Faster project commencement: Eliminating 6-12 months of presales campaigning allows faster construction start, potentially reducing total project duration and holding costs despite higher finance rates during construction.

Example scenario: Consider a 10-unit townhouse development with $7 million anticipated sales. Strategy A involves 12 months achieving 70% presales at 12% discount ($490k lost revenue), then 6 months construction with 7.5% bank finance. Strategy B uses private finance at 13% with no presales delay, 6 months construction, and sells completed units at full price. Despite higher interest costs ($140k more), Strategy B might generate $350k additional net revenue while completing 12 months faster.

Whether this approach suits your project typically depends on market conditions, project characteristics, your risk tolerance, and cash flow capacity to service higher interest during construction.

The Construction Finance Application Process

Understanding what lenders assess when evaluating development finance applications may help you prepare more effectively and potentially improve approval chances.

Core Assessment Criteria

Feasibility study comprehensiveness: Lenders typically require detailed development feasibility demonstrating 15-20% Return on Cost (ROC) minimum, with sensitivity analysis showing the project remains viable under adverse scenarios (10% cost increase, 10% revenue decrease, or 6-month delay).

Your feasibility typically needs to demonstrate:

• Detailed cost breakdown from quantity surveyor or experienced builder
• Market evidence supporting sale price assumptions (recent comparable sales)
• Realistic timeline with contingency allowances
• Absorption rate analysis showing achievable sales velocity
• Professional fee allowances and contingency provisions
• Finance cost calculations under proposed debt structure

Development approval status: Projects with approved Development Applications (DA) or Complying Development Certificates (CDC) generally face easier approval paths than those pending approval. Some lenders provide pre-approval subject to DA grant, whilst others require approved plans before proceeding.

Builder credentials and contract structure: Lenders typically require licensed, insured builders with relevant experience and financial capacity. Fixed-price contracts with appropriate stage payment structures generally satisfy lender requirements better than cost-plus arrangements.

Developer track record: Particularly with major banks, your development history significantly influences assessment. First-time developers may need to demonstrate related industry experience, strong financial position, and potentially accept lower LVR or provide additional security.

Market conditions and location: Lenders assess end market demand through comparable sales analysis, vacancy rates, population growth data, and local economic indicators. Projects in established markets with strong fundamentals typically receive more favourable assessment than those in emerging or declining areas.

Security position and exit strategy: Clear exit strategy—whether through progressive settlements, bulk settlement, or refinancing—provides lenders confidence in timely debt repayment. Projects with strong buyer markets and multiple exit options generally receive better terms.

Documentation Requirements Checklist

Preparing comprehensive documentation before approaching lenders may streamline the approval process:

Development feasibility documentation:

• Complete feasibility study with itemised costs and revenue
• Quantity surveyor’s cost estimate or builder’s fixed-price contract
• Market analysis with comparable sales evidence
• Sensitivity analysis and risk assessment

Site and planning documentation:

• Current title search and ownership verification
• Approved Development Application or Complying Development Certificate
• Architectural plans, engineering reports, and geotechnical assessment
• Town planning report and any specialist reports (traffic, environmental, heritage)

Developer credentials:

• Company structure documentation and director identification
• Financial statements (typically last 2-3 years)
• Development history and references for completed projects
• Curriculum vitae demonstrating relevant industry experience

Builder and professional team:

• Builder licence verification and insurance certificates
• Fixed-price building contract or preliminary tender pricing
• Professional indemnity insurance for consultants
• Builder financial references and capacity assessment

Financial position evidence:

• Bank statements confirming available equity funds
• Asset and liability statement
• Pre-approval letters from end buyers if claiming presales
• Evidence of any co-investor or joint venture arrangements

Project Type Considerations for Construction Finance

Different development formats typically present distinct financing considerations, with lenders assessing risk and structuring facilities differently based on project characteristics.

Townhouse Developments (4-20 Units)

Townhouse developments may represent a sweet spot for many lenders—large enough to generate meaningful returns but small enough to avoid significant presales challenges and construction risk.

Typical financing characteristics:

• LVR commonly reaching 70-75% TDC or GRV with non-bank lenders
• Presales requirements often 30-50% for non-banks, 70% for major banks
• Construction periods typically 12-18 months, managing interest capitalisation risk
• Simpler strata structures than apartment buildings, potentially faster settlements

Key feasibility considerations might include land cost as percentage of TDC (ideally under 40% for positive feasibility), construction costs per square metre (typically $2,000-3,500/m² depending on finishes and site complexity), and end values supporting adequate margins after all costs.

Some lenders prefer townhouse formats for their relative simplicity and strong buyer markets, particularly in middle-ring suburban locations with limited apartment supply.

Apartment Buildings (20+ Units)

Larger apartment developments typically face more rigorous lender assessment due to higher capital requirements, longer construction periods, and presales challenges.

Financing considerations commonly include:

• Presales requirements typically 70-100% of debt for major banks
• Longer approval timeframes reflecting complexity and risk assessment depth
• Progress drawdown structures often more detailed with architect certification requirements
• Higher minimum developer track record expectations from lenders

Feasibility elements requiring particular attention might encompass construction contingencies (commonly 5-10% due to complexity and scope variation risk), marketing and sales costs (potentially 4-6% of GRV including display suite, sales commissions, and advertising), and body corporate establishment costs with initial sinking fund contributions.

Projects demonstrating strong pre-construction sales momentum typically receive better financing terms, as this validates market demand and reduces lender exposure.

Commercial Developments

Commercial construction finance generally requires demonstrated pre-lease commitments similar to residential presales requirements.

Typical lender requirements might include:

• Pre-lease commitments covering 50-80% of net lettable area
• Tenant covenant strength assessment (credit-rated tenants preferred)
• Lease term evaluation (longer terms providing better security)
• Specialised valuation considering income capitalisation rates

Commercial developments without pre-lease commitments typically require private or mezzanine finance given speculative nature of leasing completed space.

Subdivision Developments

Land subdivision projects may attract different financing structures, often combining acquisition finance with development finance for civil works.

Financing typically structured as:

• Acquisition facility for land purchase (potentially 65-70% LVR)
• Development facility for civil construction and authority charges
• Progressive release mechanisms as titles register and lots sell

Staged subdivision developments allow progressive lot releases and debt reduction, potentially improving financing terms for later stages. Lenders typically require civil contractor experience, appropriate insurance, and evidence of buyer demand through presales or comparable sales.

State-Specific Considerations Affecting Financing

Whilst construction finance products remain relatively consistent across Australian states and territories, various state-based factors may impact project feasibility and consequently influence financing decisions.

Stamp Duty Variations

Land acquisition stamp duty rates differ significantly across jurisdictions, affecting your initial equity requirement and total development costs:

New South Wales: Stamp duty reaches approximately 5.5-7% on commercial transactions, with foreign purchaser surcharge of 8% additional. The higher duty regime means NSW projects typically require more upfront equity.

Victoria: Duty rates reach approximately 6-7% for property transactions, with 8% foreign purchaser duty surcharge. Victoria’s recent changes to off-the-plan duty concessions may affect presales strategies.

Queensland: Generally offers lower duty rates at approximately 4.5-5.5% for commercial property, potentially requiring less initial equity than southern states.

Western Australia and South Australia: Duty rates typically falling in the 5-6% range, with various concessions available for certain transaction types.

ACT, NT, and Tasmania: Smaller markets with varying duty treatments, often with concessions available for development projects.

These variations directly impact your TDC calculations and required equity, potentially influencing whether projects proceed and which lender LVR structures prove most advantageous.

Development Contribution Requirements

Infrastructure contributions and planning charges vary dramatically between councils and states, creating significant feasibility implications:

Developer contributions in growth areas might range from $10,000-50,000 per dwelling depending on location and required infrastructure. Sydney’s western suburbs typically see contributions of $40,000-70,000 per dwelling, whilst inner-city infill sites might pay minimal contributions.

Section 7.11 contributions (formerly Section 94) in NSW, Development Contribution Plans in Victoria, and Infrastructure Charges in Queensland all represent mechanisms for funding community infrastructure. Understanding these costs during feasibility assessment ensures accurate TDC calculations and appropriate financing structures.

Planning Approval Timelines

Development approval timeframes influence both holding costs and construction finance structures:

NSW: Councils have 40 days for standard applications, with deemed refusal after this period enabling Land and Environment Court appeals. Complex projects often take 4-12 months including authority referrals and amendments.

Victoria: Councils must decide within 60 days, with VCAT appeals available after this period. VicSmart provisions enable faster approval for certain development types.

Queensland: Assessment timelines vary by development type, with 20 business days for code assessable and 35 days for impact assessable developments. State-significant projects may follow different pathways.

Longer approval periods increase land holding costs and potentially require bridging finance arrangements before construction finance facilities can settle.

First Home Buyer Incentives

State-based first home buyer incentives—including stamp duty exemptions, grants, and shared equity schemes—may influence buyer markets and consequently affect development feasibility and presales potential.

NSW First Home Buyer Choice: Offering stamp duty exemption or annual property tax alternative for properties under $1.5 million may improve affordability and buyer demand for your developments.

Victorian First Home Owner Grant: Providing $10,000 for new homes under $750,000 might position certain townhouse products advantageously for first home buyers.

Understanding which incentives your target buyers might access could inform pricing strategies and marketing approaches during presales campaigns.

Exit Strategies and End Financing

Construction finance facilities typically mature at practical completion, requiring clear exit strategies to repay debt as projects complete. Planning your exit strategy before commencing construction may help avoid financing challenges later.

Progressive Settlements as Primary Exit

Most residential developments exit construction finance through progressive settlements as individual units sell and settle. This approach may work well when:

Strong buyer markets enable consistent settlement velocity, with sales and settlements occurring at planned intervals providing predictable debt reduction.

Staggered completion structures allow some units to settle whilst construction continues on others, particularly in larger developments with multiple release stages.

Adequate sales momentum exists to ensure settlements occur within lender timeframes, commonly 3-6 months post-practical completion for major banks.

Lenders typically permit construction finance to remain in place for 3-12 months post-completion whilst settlements progress, though interest continues accruing on outstanding debt. Planning your sales campaign to achieve settlements soon after completion may minimise interest costs during this period.

Refinancing to Investment Loans

Developers retaining completed units for investment typically need to refinance from construction finance to standard investment loans. This transition involves:

End debt facility structured as multiple investment loans secured against individual completed units, replacing the single construction facility.

Valuation requirements on completed units to establish security values for investment lending.

Serviceability assessment demonstrating rental income and your financial capacity to service investment loans.

Planning this transition during feasibility ensures adequate serviceability and achievable valuations to support required investment debt levels.

Residual Stock Financing

When projects sell more slowly than anticipated, residual stock financing may provide time to achieve optimal sale prices rather than accepting distressed pricing:

Residual stock facilities from specialist lenders allow construction finance repayment using short-term stock finance secured against unsold completed units. These facilities typically charge 8-12% per annum and provide 6-12 months to complete sales.

Rental programs might generate some income on unsold units whilst awaiting optimal sale timing, with rental income potentially offsetting some finance costs.

Having residual stock financing arrangements in principle before completing construction may provide valuable flexibility if sales velocity underperforms projections.

Combination Strategies

Sophisticated developers often combine multiple exit strategies:

Hybrid settlement and hold: Settling sufficient units to repay construction finance whilst refinancing remaining units to investment loans for long-term rental.

Stage settlements with bridging: Settling initial stages whilst using short-term bridging for final units, providing time for price maximisation on remaining inventory.

Co-investment structures: Syndicating completed units to investment partners, crystallising developer profit whilst partners assume completed investment assets.

Discussing potential exit strategies with your construction finance lender before approval ensures alignment and may influence facility structure and terms.

Maximising Your Financing Outcome

Several strategic approaches might improve your construction finance terms or increase approval likelihood:

Build Strong Lender Relationships Early

Approaching construction finance lenders before finalising land acquisition may provide valuable insights into their appetite for your proposed project and likely terms. Some developers cultivate relationships with multiple lenders across different tiers, enabling them to approach the most suitable lender based on specific project characteristics.

Present Comprehensive Documentation

Professional, thorough documentation presenting clear feasibility assumptions, credible market analysis, and demonstrated understanding of development processes typically generates more favourable lender responses than minimal or optimistic documentation.

Model Multiple Scenarios

Presenting sensitivity analysis showing your project remains viable under adverse conditions—cost increases, revenue reductions, or timeline extensions—may provide lenders greater confidence in your feasibility assumptions and risk awareness.

Comprehensive feasibility modelling using development-specific software enables you to present multiple scenarios efficiently, demonstrating how your project performs under various market and execution conditions—analysis that lenders typically value during assessment.

Consider Staged Approaches

For larger or more complex projects, structuring development in stages might improve financing terms, as lenders often prefer smaller initial phases with proven sales momentum informing later stage financing.

Leverage Professional Advisors

Experienced mortgage brokers specialising in construction finance often maintain strong lender relationships and understand current appetite across various lender types. Their insights regarding lender suitability for specific project profiles may save significant time and potentially improve terms through their established relationships.

Key Considerations Before Proceeding

Before committing to construction finance and commencing your development, several critical considerations warrant attention:

Total cost of capital: Interest rates represent only one component of finance costs. Factor in establishment fees (commonly 1-2% of facility), legal costs, valuation fees, and ongoing account fees when comparing lenders.

Approval certainty and timing: A cheaper major bank facility requiring 12 weeks approval with uncertain outcome might prove less valuable than a more expensive non-bank facility approved within 4 weeks with greater certainty.

Covenants and flexibility: Understanding facility covenants—including requirements for lender approval of variations, constraints on cost overruns, and restrictions on scope changes—may prevent complications during construction.

Exit strategy alignment: Ensuring your intended exit strategy aligns with lender expectations regarding settlement timeframes and residual stock approaches may prevent challenges at project completion.

Professional guidance: Given the complexity and financial scale of construction finance decisions, seeking independent legal and financial advice specific to your circumstances typically represents prudent risk management.

Managing Your Funding Stack and Optimising Finance Structures

The complexity of construction finance decisions—comparing lender types, evaluating LVR methodologies, assessing presales trade-offs, and structuring funding stacks—typically requires sophisticated financial modelling to identify optimal outcomes.

Developers increasingly use specialised feasibility software to model multiple financing scenarios concurrently. Running parallel analyses comparing major bank finance with presales against private finance without presales, for example, may reveal that higher interest costs are more than offset by avoided presales discounts and faster project completion. Similarly, modelling combined funding stacks—perhaps 65% senior debt, 15% mezzanine finance, and 20% equity—against traditional 70% single-facility structures might demonstrate improved returns despite additional financing complexity and cost.

Feasly’s development feasibility platform enables developers to model these financing scenarios efficiently, comparing how different capital structures impact your project returns, equity requirements, and cash flow timing. The platform’s funding stack functionality allows you to layer multiple finance sources—senior debt, mezzanine finance, private equity, and developer equity—whilst automatically calculating interest costs, establishment fees, and timing across your entire project timeline.

Key capabilities that may support your financing decisions include:

Scenario comparison: Model identical projects under different financing structures simultaneously—comparing bank vs non-bank vs private lender terms, evaluating various LVR approaches, and assessing presales vs completed sales strategies. Side-by-side return comparisons may reveal optimal financing approaches specific to your project characteristics.

Funding stack management: Structure complex capital arrangements combining senior debt facilities, mezzanine finance, and equity sources.

Construction finance for property development represents a sophisticated financial product requiring careful consideration of project characteristics, developer circumstances, and market conditions. Understanding the various lender types, their assessment criteria, and structural approaches enables more informed financing decisions that may optimise your development returns whilst managing risk appropriately.

Whether you’re developing your first townhouse project or managing multiple concurrent developments, aligning your financing structure with project characteristics and commercial objectives—supported by comprehensive scenario modelling—typically forms a critical component of successful development outcomes.