Property Development Finance Australia

Property development finance funds a project where you buy or already own land, build multiple dwellings or units on it, and sell them at completion. The loan repays from the sale proceeds at exit, not from business cash flow.

It works differently from a standard commercial mortgage. Most facilities are sized against a percentage of the projected gross development value (GDV) of the finished project, drawn down in stages as construction progresses, and you pay interest only on the funds drawn. The wider category sits on our commercial property loans hub.

The line is simpler than most people think: a commercial construction loan funds one building you intend to use or hold, while development finance funds a project you intend to build and sell, usually with multiple units.

• A construction loan is assessed on your business serviceability and the property's as-if-complete valuation. It repays by converting to a term loan you service from cash flow.
• A development loan is assessed on the GDV of the finished project and the margin between costs and sales. It often requires pre-sales, and repays from the sales themselves.

If your plan is to occupy or hold the finished building, that is construction finance. If your plan is to subdivide or build multiple units to sell, that is development finance, and it is priced and structured differently.

We arrange finance across the full range of small-to-large scale Australian property development, including:

• Townhouse and villa developments of two to twenty units
• Medium-density apartment projects of approximately twenty to a hundred units
• Subdivision projects turning broadacre or infill land into residential or commercial lots
• Mixed-use developments combining residential, retail and commercial floor space
• Industrial subdivision and warehouse strata projects
• Specialised residential including build-to-rent, NDIS housing and student accommodation

For projects above $50M or with complex capital stacks involving institutional capital, we work alongside specialist arrangers rather than running the deal alone. Our 60+ specialist lender panel covers most viable project profiles.

Pre-sales requirements vary sharply by lender tier and project profile. As a rough guide:

• Major banks: typically 80 to 100% pre-sales before drawing on the facility, often contracted at or above the lender's valuation
• Non-bank and specialist development lenders: accept 30 to 60% pre-sales for experienced developers with good project economics
• Private capital and family office lenders: can fund with 0 to 30% pre-sales at higher rates, for projects where speed or flexibility matters more than the headline rate

What counts as a 'pre-sale' is stricter than most developers assume. The lender's credit team looks for unconditional contracts with a 10% deposit on exchange, not expressions of interest or hold deposits. I confirm what each lender on our panel will accept before any pre-sales campaign starts, so we are not refining contracts after they are signed.

For end-product types that suit owner-occupiers or investors directly, such as medical suites, warehouses or industrial strata, pre-sales can sometimes be waived because the lender views the finished asset class itself as the security. Mixed-use developments with residential components usually need 30 to 50% pre-sales regardless of the other angles.

The lender funds a percentage of gross development value (GDV), but the GDV that matters is the lender's valuer's number, not yours.

Here is how that plays out: you build the feasibility on what you expect units to sell for, the lender then commissions an independent valuation that benchmarks against recent comparable settled sales in the area, and the loan-to-GDV percentage gets applied to the valuer's figure. If your feasibility was set on aspirational sales prices, the approved facility lands smaller than you expected and the deal cannot fund at the assumed scale.

The fix is to set GDV against what the valuer will actually use, before submitting the file. We benchmark against recent settled sales and stress-test the feasibility to what survives the valuation review. Where useful, we look at commercial property market data for the project's specific submarket so the GDV evidence lines up.

A bankable feasibility lays out where every dollar comes from and where every dollar goes. Lenders look for these line items:

• Land cost at acquisition price or current market value if owned
• Construction cost from a fixed-price builder contract or quantity surveyor's estimate
• Soft costs: consultants, council contributions, marketing, holding costs
• Contingency of 5 to 10% on construction cost
• Finance costs: interest and the line fee on undrawn funds across the build
• Selling costs: agent commission, marketing, legals on each sale
• Gross development value (GDV): total sales by unit type
• Net development profit and margin on cost

On top of the line items, lenders test the project against headline ratios: a development margin of at least 18 to 20% on cost, a debt coverage ratio of around 1.5x, and an interest coverage position that holds through the build. Tighter than that, the deal is exposed if any line moves. The development finance calculator on this page runs the same maths, in real time, so you can see how your project profiles.

Development finance typically moves from a complete application to formal approval in around 2 to 6 weeks, depending on project complexity. A clean deal with all evidence ready runs at the short end, while larger projects or first-time developer files run at the longer end. A typical timeline looks like:

• Initial assessment: 2 to 5 days
• Valuation and feasibility review: 1 to 2 weeks
• Credit approval: about a week
• Legal documentation: 1 to 2 weeks
• Formal approval: a few days

The single biggest time-saver is starting early: begin the finance conversation before you sign the building contract or launch your pre-sales campaign, not after. Where a site needs to be secured before the development facility is ready, commercial bridging finance can hold the position short-term while the main approval comes through.

A development loan releases funds in stages as the project progresses, not all at once. A typical drawdown schedule for a residential development looks like:

• Land settlement, around 30% (where land is acquired with the facility)
• Site works and civil, around 10%
• Structure and shell, around 25%
• Fit-out and finishes, around 25%
• Practical completion, around 10%

Each drawdown releases after the lender's quantity surveyor inspects the stage and certifies it complete. The point to watch is cash flow timing: your builder's progress claims and the lender's drawdowns need to line up, or you are bridging the gap yourself. I structure the drawdown schedule alongside the builder's contract so this is sorted before construction starts.

The line fee is a recurring fee, usually 1 to 2% per annum, charged on the undrawn portion of your facility for the whole build. Standard commercial property loans don't carry one, so most developers don't budget for it.

On a $5M facility drawn over 18 months at 1.5% line fee, the undrawn balance can easily add $40,000 to $60,000 to total finance cost. It's the single most-missed cost on a first development. I quote the line fee stage by stage on the actual drawdown profile, and prioritise lenders where it's lower or waived against an equivalent rate. The commercial property loan interest rates page shows the current ranges on the senior rate; the line fee sits on top.

Loan-to-GDV is the central LVR metric in development finance, and the maximum varies by lender tier:

• Major banks: up to 60% Loan-to-GDV, with strict pre-sales and developer experience requirements
• Non-bank lenders: up to 65 to 70% with moderate pre-sales
• Specialist developer lenders: up to 75% for experienced developers with strong project profiles
• Private capital: up to 75 to 80% Loan-to-GDV with no pre-sales required

Higher Loan-to-GDV reduces the equity you need to contribute, but always at the cost of rate and fees. The right level depends on the project margin, your equity position, and how much line fee you're willing to absorb. The maximum Loan-to-GDV row in the lender features table on this page shows what each tier accepts.

True 100% development finance is uncommon: lenders almost always require some skin in the game. The closest most developers get is effective 100% funding of construction costs by using land equity as the contribution. Lenders count the equity in land you already own toward your contribution at current market value, not historic acquisition cost, which is one of the biggest advantages of developing land you've held.

Where additional equity is needed, the standard options are cross-collateralising other property you own, mezzanine finance topping up the senior loan, joint venture equity from an institutional or family office partner, or vendor finance on the land itself. You will still need cash on top in most structures: stamp duty, council contributions and headworks paid early, the deposit on the building contract, professional reports, and the contingency line. As a rough guide I budget 10 to 15% of total development cost in cash on top of land equity, depending on the project and lender.

Yes, though the lender pool changes. A first-time developer with a clean smaller project, an experienced builder on a fixed-price contract, strong pre-sales and solid serviceability behind them can absolutely get funded. The major banks tend to want a track record of completed projects, so first-timers usually start with a non-bank lender that has appetite for first development deals.

The factor that decides whether a first-time deal funds is project economics, not experience. If the margin is strong (over 20% on cost) and the comparable sales evidence supports the GDV, lenders find a way. If the margin is thin and the GDV is stretched, no amount of experience helps. We routinely place first-time developer deals across our panel, and the work that goes into application preparation, the QS report and the pre-sales evidence makes more difference than the developer's previous projects.

The biggest development finance risks are cost overruns, construction delays, valuation shortfalls at completion, and slow sellout at exit. Each one compresses the project margin and tests the contingency. The most common containment strategies are deploying contingency, additional developer equity, repricing finishes mid-build, or selling early units faster than planned.

Mezzanine finance sits as a backstop in that mix. It's a second-tier facility behind the senior development loan, increasing total Loan-to-GDV, typically priced at 12 to 18% per annum. I use it selectively, mostly where a strong project is short of equity, or where the senior lender's Loan-to-GDV cap leaves a gap before the project is fully funded. It is not free money: the margin compression from mezz costs has to be tested against the developer's profit, and there are deals where mezzanine makes the project unviable rather than viable.

The eligibility check and development finance calculator further up this page give you a fast read on your project's likely funding position, showing your loan-to-GDV, margin and equity contribution in real time. Both run in under a minute.

For a deal-specific assessment that factors in your actual site, costs, sales evidence and pre-sales position, call us on [sbp_phone] or book a free consultation. Smart Business Plans has arranged over $550 million in commercial finance for 3,300+ Australian businesses, and we also arrange business loans for the operational side of your development business. For the ATO's position on the tax and GST treatment of property development, see the ATO property and construction guidance, worth a read before you go to market.