Property Development Finance and Loans
Compare property development finance for land, construction and project completion. Understand GRV, LTC, pre-sales, drawdowns and capitalised interest.
How does property development finance work?
Property development finance funds land acquisition, construction and project completion. Approval commonly depends on the project's gross realisation value (GRV), total development cost, developer experience, equity contribution, pre-sales and exit strategy. Lenders also review planning approval, the building contract, contingency allowance and proposed construction drawdowns.
What Is Property Development Finance?
Property development finance is a short-term specialist loan, also known as construction finance or a property development mortgage, designed to fund property development projects, covering: ✔ Land acquisition costs ✔ Construction costs ✔ Council and approval fees ✔ Professional fees (architects, engineers, consultants, etc.) ✔ Marketing and sales costs for completed units Unlike a standard mortgage, a property development mortgage is structured in stages (drawdowns), where funds are released at key project milestones, ensuring cash flow is managed efficiently throughout the build.
Types of Development Finance
The appropriate structure depends on the project stage, total cost, completed value, available equity and exit strategy. Housing development finance for duplexes, townhouses and apartments may use one or more of the following sources.
Senior Debt (First Mortgage Finance)
- The primary loan secured against the property. - Covers up to 65-75% of Total Development Costs (TDC). - Repayments may be interest-only during the construction phase. - Typically provided by banks and major lenders.
Mezzanine Finance
- A secondary loan used to reduce the developer’s capital contribution. - Sits behind senior debt, increasing overall leverage. - Can extend funding to 85-90% of TDC. - Higher risk = higher interest rates.
Private & Non-Bank Development Finance
- Offers flexible lending criteria and higher LVRs. - Faster approvals compared to traditional banks. - Suitable for projects with unique structures or limited pre-sales. - Interest rates vary based on risk and lender type.
Joint Venture (JV) & Equity Finance
- Investors or equity partners provide capital in exchange for a share of project profits. - Reduces the need for traditional debt but requires profit-sharing agreements.
Which development finance structure suits your project?
This is a general comparison. Approval priorities, pre-sales, documents, equity and exit conditions depend on project scale, location, borrower experience and lender policy.
| Project type | Common approval focus | Pre-sale requirements | Key documents | Developer equity | Exit options |
|---|---|---|---|---|---|
| Duplex or small residential project | Title structure, planning approval, builder capability, budget and developer experience. | A small project may not require pre-sales, depending on the exit strategy and lender policy. | Planning and building approvals, fixed-price contract, feasibility, builder quote and valuation. | Depends on land equity, total development cost, completed value and the required risk buffer. | Sell one or both dwellings, or retain and refinance subject to valuation and serviceability. |
| Townhouses | Sales velocity, build cost, contingency, construction progress and the development team. | Qualifying pre-sales may be required as the number of dwellings and project risk increase. | Development approval, detailed feasibility, fixed-price building contract, QS report, valuation and pre-sale evidence. | Land equity or cash is commonly contributed first, with LTC and loan-to-GRV limits applying. | Repayment from unit settlements; retained dwellings require a separate long-term loan assessment. |
| Apartments | Pre-sale settlement risk, buyer concentration, build complexity, cost escalation and completion timing. | Many lenders set requirements for coverage, buyer diversity and qualifying contracts. | Full approvals, feasibility, pre-sale schedule, building contract, QS report and as-if-complete valuation. | More upfront equity and clear cost and interest buffers are commonly required. | Repayment from apartment settlements or separate refinance of residual and retained stock. |
| Commercial development | Asset use, completed valuation, pre-leasing, tenant quality, build cost and the professional team. | Qualifying pre-leases or leases may replace the pre-sale tests used for residential projects. | Approvals, detailed feasibility, pre-leases or leases, building contract, cost report and commercial valuation. | Specialised use or greater leasing risk may result in a higher equity requirement. | Sell the completed asset or refinance to a term commercial-property loan once income is stabilised. |
| Mixed-use development | Residential and commercial income mix, use split, tenant quality, valuation method and staging risk. | Both residential pre-sales and commercial pre-leases may be assessed, depending on the income mix. | Full approvals, use-specific feasibility, pre-sale and pre-lease evidence, building contract, cost report and valuation. | More complex structures commonly require stronger equity and contingency buffers. | Sell components separately or together, or refinance against stabilised income after completion. |
Development finance eligibility and documents
Lenders commonly review a detailed feasibility, land and planning status, fixed-price building contract, builder credentials, developer experience, quantity-surveyor reports, pre-sales or pre-leasing, contingency allowance and a clear exit strategy. First-time developers are not automatically excluded, but may need a stronger professional team, more equity or a lower-risk project.
- Confirm land, approval, construction, professional, interest and contingency costs.
- Support the GRV with an independent valuation and document the sale or refinance exit.
- Document the source, timing and amount of developer equity.
- Check qualifying pre-sales, sunset clauses and contract requirements.
GRV, LTC and LVR compared
| Measure | What it measures | Why it matters |
|---|---|---|
| GRV | The estimated total value of all completed dwellings or lots. | It helps the lender test completed value and exit risk. |
| LTC | The loan as a percentage of eligible total development cost. | It indicates how much developer equity is required. |
| LVR | The loan relative to the lender-accepted valuation. | Confirm whether the lender uses current land value or completed value. |
Pre-sales, capitalised interest and drawdowns
Pre-sales
Some lenders require sufficient qualifying arm's-length pre-sales to support the exit and reduce market risk. Other lenders may consider fewer or no pre-sales, usually with different leverage, pricing or conditions.
Capitalised interest
Construction-period interest may be added to the facility rather than paid monthly, but it must be included in the feasibility and lender limits. Capitalising interest does not make it free.
Construction drawdowns
Each draw commonly requires progress evidence, quantity-surveyor or valuer sign-off, invoices and confirmation that the project remains within budget. Developer equity is usually contributed first or in an agreed proportion.
Brisbane townhouse development finance scenario
A townhouse development has planning approval and a fixed-price building contract. The finance review tests land cost, build and professional fees, contingency, interest, GRV, developer equity, pre-sales and the sale or refinance exit. If the valuation falls or costs rise, the required equity may increase. This is an illustrative scenario, not a client testimonial or lending commitment.
How Much Can You Borrow?
When assessing your development mortgage application, lenders look at:
Loan-to-Cost Ratio (LTC)
% of total development costs covered (typically 65-75%).
Loan-to-Gross Realisation Value (LVR or GRV)
% of completed project value that can be borrowed (typically 60-70%).
Pre-Sales & Pre-Leasing Requirements
Some lenders require a percentage of units pre-sold before releasing funds.
Developer Experience
More funding options for developers with a proven track record.
How Development Finance is Drawn
The facility is normally released against agreed project milestones and verified costs rather than as one lump sum.
1. Land Acquisition
The first drawdown funds the purchase of the development site. Interest is charged only on this initial amount while you prepare for construction.
2. Construction Drawdowns
Funds are released in progress payments as each construction milestone is reached — slab, frame, lock-up, fixing, and practical completion. The lender inspects the site before each release.
3. Completion & Exit
Once the project is complete, the facility is repaid through settlement of sales or refinanced into a long-term investment loan. A clean exit strategy is something lenders look for when approving a development mortgage upfront.
A property development mortgage (also called construction finance or development finance) is a specialist loan used to fund the construction or development of residential or commercial property. Unlike a standard mortgage, funds are drawn progressively at each construction milestone rather than provided as a lump sum — so you only pay interest on the amount drawn at any time.
Most lenders will finance up to 65–70% of the total development cost (TDC) or as-if-complete valuation (GRV), whichever is lower. The exact amount depends on your project type, location, developer experience, and pre-sales achieved. Our brokers work with specialist lenders to maximise your borrowing capacity for the development mortgage.
We arrange property development mortgages for residential subdivisions, townhouse and apartment developments, mixed-use projects, commercial developments, and land banking. Our brokers work with specialist lenders across Australia to match the right mortgage structure to your project.
A property development mortgage is drawn in stages tied to construction milestones — such as slab, frame, lock-up, fixing, and practical completion. The lender carries out progress inspections before releasing each drawdown. Interest is only charged on the drawn balance, which helps manage cash flow throughout the project.
Requirements vary by lender. Some lenders require prior development experience to approve a development mortgage; others work with first-time developers who have a strong project, an experienced builder, and a solid feasibility study. Our brokers match you with the right lender for your experience level and project profile.
No. Property development finance generally refers to commercial lender funding for privately owned residential, commercial or mixed-use projects. Housing Australia programs support eligible social, affordable and institutional housing projects under separate eligibility rules and funding structures. If your project has an affordable-housing component, confirm the applicable program requirements before choosing a finance structure.