QUICK INSIGHT
Property development finance is funding used to acquire, construct or complete a property project. Depending on the facility, it may cover land acquisition, construction costs, professional fees and holding costs until the development is sold, leased or refinanced.
Property development finance in Australia is commonly used by developers, builders and investors delivering residential, commercial or mixed-use projects. Facilities are typically secured against the development site or other eligible property, with funding tailored to the scope, timeframe and requirements of the project.
HOW DOES PROPERTY DEVELOPMENT FINANCE WORK?
Property development lending usually follows a clear process:
- Initial assessment — The lender reviews the site, planning status, project feasibility and borrower experience.
- Facility assessment — The loan amount, loan-to-value ratio (LVR), term and drawdown schedule are determined based on the project costs, security and proposed timeframe.
- Approval and documentation — Security is registered and loan terms are finalised.
- Staged drawdowns — Funds are typically released in stages as construction milestones are met, rather than as a single lump sum.
- Completion and repayment — The loan is repaid through sale proceeds, refinance or another agreed exit strategy once the project reaches completion.
Private lenders may offer a faster, more flexible version of this process, particularly at the assessment and approval stages.
WHAT INFLUENCES PROPERTY DEVELOPMENT FINANCE COSTS?
The overall cost of property development finance depends on the strength of the transaction rather than a single factor. Lenders typically consider the proposed development, available security, loan amount, project timeframe and repayment strategy when assessing a facility.
Depending on the lender and the transaction, costs may include interest, establishment fees, valuation and legal expenses, along with other fees associated with staged funding where applicable.
Projects with strong security, lower leverage and well-supported exit strategies may receive more favourable lending outcomes than higher-risk developments.
BANK FINANCE VS PRIVATE DEVELOPMENT FINANCE
| FEATURE | BANK DEVELOPMENT FINANCE | PRIVATE DEVELOPMENT FINANCE |
| Approval process | Multiple approval stages | Direct assessment by the lender |
| Decision timeframe | Often longer | May be faster, depending on the transaction |
| Lending approach | Typically guided by lending policy | Assessed on the merits of the transaction |
| Funding flexibility | More standardised | Tailored to the project’s requirements |
| Decision-maker | Commonly a credit committee | Often the lender directly |
WHAT DO LENDERS ASSESS BEFORE APPROVING A DEVELOPMENT LOAN?
Before approving property development finance in Australia, lenders typically assess:
- Site value, location and the proposed development
- Project feasibility and development costings
- Planning approvals and Development Application (DA) status
- The borrower or developers experience and track record
- Presale levels, where relevant to the project
- The proposed exit strategy
- The requested loan amount and loan-to-value ratio (LVR)
Every development project is different. Rather than relying solely on a standardised policy, private lenders may assess the overall strength of the transaction, taking into account the security, project viability and proposed exit strategy. This approach can support faster lending decisions where the project meets the lender’s requirements.
ARE THERE AUSTRALIA-SPECIFIC LENDING CONSIDERATIONS?
Property development finance is used across Australia, with each project assessed according to its location, planning status, available security and overall feasibility. Private lenders operating across NSW, VIC, QLD and the ACT may also draw on their understanding of these markets when assessing a development proposal.
Depending on the stage of the project, developers may also consider other funding solutions. Residual stock finance can assist with completed developments that still have unsold lots or dwellings, while bridging finance may provide short-term funding between transactions or ahead of a refinance or sale.
CASE STUDY: FUNDING A RESIDENTIAL CONSTRUCTION PROJECT
To illustrate how development finance works in practice, Central Real Capital recently funded a residential construction project in the ACT with a $2,054,250 first registered mortgage at an LVR of 82.5%.
In this type of scenario, a developer has an approved project underway and requires additional funding to complete the remaining stages of construction. Development finance can be advanced in stages as agreed construction milestones are achieved, helping ensure funding is available when it’s needed throughout the build.
Once construction is completed, the loan is commonly repaid through the sale of completed dwellings, a refinance or another agreed exit strategy.
Every development project is different, with the loan amount, LVR and funding approach assessed according to the available security, project feasibility and proposed exit strategy. Explore more of our recently funded projects or speak with our team about your development finance requirements.
DISCUSS PROPERTY DEVELOPMENT LENDING WITH CENTRAL REAL CAPITAL
Central Real Capital works with developers, investors and brokers seeking property development finance outside traditional bank lending.
If you require funding for a development project, our team can review your funding requirements, available security, project timeframe and proposed exit strategy.
Speak with Central Real Capital to discuss your property development finance options.
