Can You Finance a Development Site Before DA Approval?
Property Lending Hub
Site acquisition finance · Pre-DA land loans · Development sites
A site with no development approval is not a harder version of a normal property loan. It is an earlier stage of the development finance cycle. This guide follows the whole transaction: what to test before exchange, how a lender values and secures the site, how much equity and settlement cash you actually need, what happens if planning is delayed, refused or weakened, and what changes if DA approval creates a stronger valuation and a path into construction finance.
Quick Answer
Yes, but rarely by a bank. Pre-DA land falls into a less favourable capital category, so the funding usually comes from a specialist non-bank or private lender sizing the loan against the site's current value, your available equity and a defined exit rather than against DA approval.
Also called: site acquisition finance, land bank funding, pre-DA land loan, englobo land finance.
Can you finance a development site before DA approval?
Yes. Bank funding is possible in some cases, but specialist non-bank and private lenders are often the more practical route before approval because they can lend against the site in its current state and a defined repayment event. The facility is usually short and is designed to be taken out by construction finance, a sale or another refinance rather than held indefinitely.
The core credit questions are security, meaning what the land is worth today on the lender's valuation basis; equity, meaning how much real money remains behind the debt; exit, meaning the costed and dated event that repays the loan; and holding capacity, meaning whether the project can carry interest, rates, tax and delays until that exit arrives. The sponsor, entity, experience and lender-specific policy still matter as well.
| Where you are now | The finance question that matters now | What happens next |
|---|---|---|
| Before making an offer | What is the site worth as-is, and what price does the feasibility support? | Test the planning yield, valuation basis, acquisition costs and construction takeout before the contract becomes your problem |
| Exchanged, no DA | How much cash is needed after the as-is valuation, duty and fees? | Size site acquisition finance and get valuation, planning evidence and the exit moving together |
| Settlement is close | Can the facility, valuation and legal work finish before the contract date? | Run finance and any extension negotiation in parallel; do not wait for one to fail before starting the other |
| Holding under an option | What interest can the lender secure before you own the land, and can you pursue the planning application? | Have the option and state-specific planning requirements read before assuming a mortgage, caveat or DA pathway exists |
| DA is under assessment | Will the site facility survive the real planning timetable and any extension? | Track capitalised interest, LVR headroom and evidence for an extension before expiry |
| DA is approved | Does the approved project pass the construction lender's valuation, cost, equity and pre-sale tests? | Revalue, re-cost and refinance; DA approval is a gateway to construction finance, not an automatic approval |
If you are still deciding what to offer, start with the pre-exchange finance checks, how the land gets valued and how much of your own money the deal will take. If you are already exchanged and the bank has declined, go straight to what a lender needs before it will quote and how fast this can settle. If you are buying under an option or conditional contract, read what a lender can actually secure first.
Related reading from the cluster: site acquisition finance on a small budget, pre-construction funding before the DA, the companion guide to what lenders actually test in a feasibility, and the wider property development finance guide.
What should you check before you exchange on a pre-DA development site?
Before you exchange, test the planning, the as-is valuation and the construction takeout together. The mistake is proving only that you can settle. The real question is whether the deal still works if the valuation is lower, approval takes longer, the site needs more work than expected or the future construction lender sizes the project more conservatively than your feasibility.
| Check before exchange | Why it changes the finance | What to have in hand |
|---|---|---|
| Planning and realistic yield | Zoning, overlays, height, density, heritage and the assessment pathway drive both value and the time the site must be held | Written town-planner advice, a concept yield and a realistic approval pathway |
| Title, easements and covenants | A restriction can reduce buildable area, change yield or affect what a lender can register | Current title and plan reviewed by the property solicitor before the finance is sized |
| Physical site and services | Contamination, rock, flood, access, sewer, water or power constraints can move both construction cost and residual land value | The site investigations and service enquiries that are material to this parcel, not a generic checklist |
| Duty, GST and contract tax treatment | Tax at acquisition changes the cash required at settlement and can affect the later development feasibility | Accountant and solicitor advice on duty, GST, the buying entity and whether the contract uses the margin scheme where relevant. The ATO explains the GST-at-settlement rules |
| As-is valuation | A lender can advance against a lower figure than the price you negotiated on future development potential | An indicative as-is view before exchange, then a lender-instructed valuation once the finance proceeds |
| Settlement cash | Deposit, valuation gap, duty, legals and lender costs fall on different dates and may not all be fundable from the site facility | A sources-and-uses schedule showing exactly where every settlement dollar comes from |
| Construction takeout | A site loan that cannot roll into construction finance is just a more expensive holding problem | A shadow construction feasibility showing the likely DA, build cost, QS requirement, end value, equity and any pre-sale or pre-lease gate |
| Option or conditional contract rights | Before completion you may not have land that can be mortgaged, and planning owner-consent or notification rules differ by state and application type | A solicitor-reviewed agreement that gives you the rights needed to pursue planning, meet conditions and settle into the intended buying entity |
The contract conditions are part of the finance structure. A finance, planning, due-diligence or long-stop condition can preserve options if the vendor agrees and the clause is drafted to cover the actual risk. An auction purchase or unconditional exchange removes much of that protection. Do not assume a generic "subject to finance" clause covers a specialist site-acquisition facility, and do not sign a DA condition without your solicitor checking exactly what approval event satisfies it.
GST can also change the settlement mechanics, not just the eventual tax return. The ATO says purchasers of certain new residential premises and potential residential land may have a GST-at-settlement withholding obligation, while potential residential land supplied to a GST-registered business acquiring it for a creditable purpose is excluded from that withholding rule. If the margin scheme applies, the purchaser cannot claim a GST credit for the GST included in the price. Read the vendor's GST notification before finance is sized and have the accountant and solicitor confirm the treatment rather than assuming GST is only a post-settlement BAS issue. See the ATO's GST-at-settlement guidance.
From our broking, practical sequencing
The best time to test the construction refinance is before the site facility settles. Ask the likely takeout lender what would have to be true for it to refinance the site after DA: the approved scheme, valuation basis, construction cost evidence, equity contribution, sponsor experience, builder and any pre-sale or pre-lease conditions. You do not need a construction approval before exchange, but you do need to know whether the exit you are relying on is commercially plausible.
General practitioner guidance only. The exact construction takeout conditions vary by lender, project, state and market at the time. Not a promise of approval or a quote.
If a single check above fails, do not solve it by simply increasing the site-loan term. Re-cut the price, the contract condition, the equity or the exit while you still have negotiating leverage. The deeper finance test is in our guide to what lenders actually test in a development feasibility.
Why is bank finance harder before DA approval?
APRA does not ban a bank from lending on a development site before DA approval. The issue is that land acquisition and development is an ADC exposure under APS 112, and the capital treatment can be less favourable when the conditions for the lower residential ADC risk weight are not met. Prudential capital is one constraint; the bank's own credit policy, leverage, sponsor and exit requirements are another.
APRA's Prudential Standard APS 112 defines the category:
"Land acquisition, development and construction (ADC) refers to property exposures where the security for the loan predominantly relates to any of the land acquisition for development and construction purposes, or development and construction of any residential or commercial property."
APRA, Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk, Attachment A. apra.gov.au. As at August 2026. Applies to ADIs on the standardised approach.Under the current standard, residential ADC may receive a 100 per cent risk weight where the relevant conditions are met, including total debt to qualifying development costs below 75 per cent. Where the exposure to the borrower is greater than $5 million in aggregate for a single development, qualifying pre-sales for the underlying property must also be at least 100 per cent of total debt. APRA then states the default treatment for other ADC:
"An ADI must apply a risk weight of 150 per cent to all other ADC exposures."
APRA, Prudential Standard APS 112, Attachment A. apra.gov.au. As at August 2026. Applies to ADIs on the standardised approach.What that means in practice: a pre-DA site can still be bank-financeable, depending on the size, leverage, structure and the bank's policy. But the earlier and less-defined the project is, the harder it can be to satisfy the conditions and credit evidence that make a bank comfortable. That is why specialist non-bank and private lenders are often the practical acquisition route without making the false leap that bank funding is legally unavailable.
What would APRA's proposed 50 per cent pre-sales change actually change?
APRA has proposed reducing the qualifying pre-sales requirement for the relevant residential ADC exposures from 100 per cent of total debt to 50 per cent:
"APRA proposes to lower the qualifying pre-sales requirement for the underlying property from 100 per cent of the total debt to 50 per cent of the total debt."
APRA, Getting the balance right on financial resilience, Workstream 1: Credit risk capital, consultation opened 29 June 2026. apra.gov.au. Read August 2026. A proposal under consultation, not a rule.Submissions close 7 September 2026 and APRA's proposed commencement is 1 April 2027. If finalised, the change would reduce one capital hurdle for some approved residential developments. It would not itself make an unapproved site bankable: the lender would still apply its own planning, valuation, leverage, sponsor, servicing and exit requirements, and a pre-DA project may not yet have the approved product needed for qualifying pre-sales under the lender's policy. Do not term a facility today against a rule that has not been made.
Capital treatment is only one layer of the bank decision
Do not turn the prudential standard into a universal bank credit policy. Two banks can read the same site differently because each sets its own sector appetite, concentration limits, minimum equity, sponsor requirements and definition of qualifying pre-sales. The useful question is therefore not "will a bank lend on land with no DA?" in the abstract. It is "what evidence would this lender need to hold this ADC exposure at this stage, and can my project produce it before settlement?"
Why specialist private and non-bank lenders are often used at this stage
Private and specialist lenders can price an earlier-stage site directly around the property, equity position, structure and exit rather than requiring the project to fit a mainstream development policy from day one. That flexibility is useful, but it comes with shorter terms and a greater need to understand the total facility cost and the consequences if the exit slips.
ASIC's private credit surveillance has also increased scrutiny on how private credit is conducted. That is not a reason to avoid the sector; it is a reason to compare the lender, legal documents, valuation basis, net advance, extension terms and enforcement position carefully. See where non-bank development funding sits and how private lending is structured.
How is land with no approval actually valued?
On the basis the lender instructs, and the basis changes the number more than the market does. This is the single most misunderstood part of a pre-consent deal: a developer negotiates against what the site is worth with the approval they expect to get, and a lender advances against what it is worth without one.
Three bases do most of the work. As-is market value is the site as it stands, with no consent assumed, and it is the figure a pre-DA facility is sized against. As-if-complete value, expressed through gross realisation value, is what the finished project would sell for, and it is what a construction facility is later sized against. Residual land value works backwards from that end value, deducting construction costs, professional fees, finance costs, selling costs and a profit and risk margin, to derive what the land is worth to a developer. All three can be correct at once, and they can be a long way apart.
| Valuation basis | What it measures | Where it is used |
|---|---|---|
| As-is market value | The site in its current state, with no consent assumed and no development commenced | The security figure a pre-DA facility is advanced against |
| As-if-complete value | The value of the finished project on completion, before selling costs | Sizing a construction facility once consent exists |
| Gross realisation value | Total gross proceeds of the completed and sold development | The headline number in a feasibility, and the base for sell-down assumptions |
| Residual land value | End value less costs, finance, selling costs and a profit and risk margin, back-solved to land | Testing whether the purchase price the developer agreed actually works |
| Englobo value | A large undeveloped parcel valued in one line rather than as individual lots | Broadacre and undivided sites, where lot-by-lot pricing would overstate value |
| Hypothetical development or discounted cash flow | A staged sell-down discounted back to present value | Larger or staged sites where timing materially affects worth |
| Short form residential report | A short form template style report with a full on-site inspection by the valuer and limited enquiries | Standard residential security, and the wrong instrument for an undeveloped parcel |
Two practical points follow. First, if the land is broadacre and undivided, it is being valued as a single parcel on its potential, discounted for the time, cost and risk of getting it to a saleable state. That is a different exercise from valuing a titled lot, and it is why a residential short form report is the wrong tool. The Australian Property Institute describes the short form product as a "short form template style report" involving full on-site physical inspection by the valuer and limited enquiries, which is exactly the enquiry depth an undeveloped parcel does not survive.
The API's valuation standards and guidance papers are the professional framework a valuer works within, and it is reasonable to ask which basis and which instruction your valuation was prepared under.
Second, where the site's value depends on a rezoning that has not happened, the assumption has to be stated on the face of the valuation rather than buried in it. A number that quietly assumes a planning outcome is not a security figure, it is a forecast. If your feasibility and your valuation disagree, the gap is almost always here. See site acquisition and security for how the terms fit together.
How much of your own money will the deal take?
More than the deposit, and usually more than the feasibility says, because the advance is struck against as-is value rather than against the price you agreed. Everything in the previous section has a consequence, and this is it: if you negotiated on what the site is worth with an approval and the valuer reports it without one, the difference does not come out of the lender's advance. It comes out of your pocket, at settlement, in cash.
There is a second mechanism underneath it that is worth stating plainly, because most developers model only the first. A facility is normally sized as the lower of a percentage of the as-is security value and a percentage of total project cost. Whichever of those two calculations produces the smaller facility is the one that applies. That is why your equity contribution, rather than the lender's headline advance rate, is usually the binding constraint on a pre-consent site, and why a generous-sounding percentage against value can still leave you short.
Advance rates themselves are lower on pre-consent land than on completed property, and they move with the lender, the security position and the strength of the exit, so work from an indicative figure obtained for your own site rather than from a published band.
That is the arithmetic that decides most pre-consent deals, and it is almost never done before exchange. Six cost heads sit between you and settlement, and only one of them is the deposit.
| Cost head | Who funds it | Why it catches people out |
|---|---|---|
| Deposit at exchange | You, or a short-term facility against other security | Falls due before any site facility settles, so it cannot come from the site loan itself |
| Valuation gap | You, in cash at settlement | The difference between the price you agreed and the as-is figure the lender advances against. This is the single largest surprise on a pre-consent file |
| Transfer duty | You, unless the lender agrees to fund it inside the facility | Assessed on the purchase price, not on the as-is valuation, so it does not shrink when the valuation does |
| Legals, searches and due diligence | You, plus the lender's legal costs on top | Both sides of the legal cost sit with the borrower on a private facility, and they are payable whether or not the deal proceeds |
| Holding costs to expiry | Capitalised into the facility, or paid monthly | Capitalising is easier at settlement and worse at expiry, because the balance grows against a valuation that does not |
| Extension contingency | You, held back rather than deployed | Almost nobody holds it, which is why an extension request arrives with nothing to offer the lender |
The same logic governs where the equity can come from. Equity that is really a related-party loan is not equity, and a lender that discovers a shareholder loan sitting behind the "contributed" funds will re-cut its position late, after you have paid for valuations and legals. If the deposit itself has to be raised against another asset first, that is a separate short facility with its own timetable, covered in our note on funding the site deposit and, where duty falls due before funds are available, covering the stamp duty gap.
How do private lenders size a pre-DA site loan, and which funding route fits?
A private lender usually starts with the lender-accepted as-is value of the security, then applies its own leverage, cost, structure and exit limits. The borrower and sponsor still matter. What changes is the weighting: a short business-purpose site facility is often more sensitive to security, equity and the repayment event than a long-term income-serviced mortgage.
On Switchboard Finance's current private lending page, the headline maximum shown for a metro development site is 50 per cent LVR. That is a current panel ceiling, not a market-wide rule, approval promise or quote. A lender can advance less because of the valuation, location, planning position, security ranking, borrower, exit or the amount of interest and fees that have to fit inside the facility.
| Funding route | How sizing usually works | Security position | What gap it usually solves |
|---|---|---|---|
| First mortgage | A percentage of lender-accepted site value, subject to lender-specific caps and the exit | Registered first ranking over the site | The purchase itself and the holding period to a consent, sale or refinance |
| Second mortgage | Combined debt is tested against the available property value and equity behind the first mortgage | Registered behind an existing first, generally requiring the first mortgagee's consent to registration | Topping up an acquisition or funding costs on a site already owned |
| Caveat-style facility | Conservative usable equity and a very short, evidenced exit drive the amount | Equitable security protected by a caveat where the underlying interest supports it; not the same as a registered mortgage | Timing gaps such as a deposit, duty gap or settlement that cannot wait |
| Vendor finance or terms contract | Negotiated as part of the price rather than a lender LVR | Vendor retains contractual or proprietary rights until the terms are met | Part of the purchase price where the vendor is willing and other financiers can live with the ranking |
| Mezzanine or subordinated debt | Sized to the residual gap after senior debt and required equity, with the highest risk in the debt stack | Subordinated to senior debt and documented under an intercreditor or priority arrangement where required | A genuine capital-stack gap that senior debt will not cover |
| Related-party or shareholder funds | Not a lender advance; credit decides whether it is treated as equity or subordinated debt | Usually unsecured or subordinated if another lender requires it | Sponsor contribution, provided its legal character is disclosed correctly |
What security does a private site lender take besides the mortgage?
The property mortgage is only one part of the security package. Depending on the borrower, entity and capital stack, a lender may also require personal or director guarantees, guarantees from related entities, a general security agreement over the borrower's personal property, and priority or intercreditor documents where another financier already has security. A PPSR registration is not a second mortgage over the land: the PPSR covers personal property rather than land, buildings or fixtures.
| Security document | What it reaches | Why it matters |
|---|---|---|
| Registered mortgage | The development site or other real property offered as security | Establishes the lender's registered real-property security and ranking |
| Personal or director guarantee | The guarantor's contractual promise to meet specified borrower obligations | Creates recourse beyond the borrowing entity, subject to the guarantee wording and law |
| Related-entity guarantee | A company, trustee or other related guarantor that supports the borrower | Can bring assets or cashflow outside the project borrower into the security package |
| General security agreement and PPSR registration | Personal property of the grantor, potentially on an all-present-and-after-acquired-property basis | Protects the lender's security interest in personal property; it is separate from the land title system |
| Priority or intercreditor deed | The ranking and enforcement relationship between two or more secured creditors | A second-ranking or subordinated lender may not proceed until the senior lender accepts the agreed priority terms |
For PPSR purposes, the Commonwealth register describes personal property as almost everything that is not land, buildings or fixtures, and describes an ALLPAP registration as a broad claim over present and future personal property. Your solicitor should read the actual guarantee, general security agreement and priority deed before you treat the words "first mortgage loan" as describing the whole recourse package. See the PPSR guidance on personal-property security.
Can a first-time developer get a pre-DA site loan without a full bank-style financial pack?
Sometimes, but "no-doc" is the wrong way to think about it. A first-time developer gives the lender less evidence of delivery history, so more weight usually falls on the equity position, the site, the planner and approved pathway, the feasibility, the builder and professional team, guarantees and the credibility of the exit. Some business-purpose private lenders can assess a short property-secured site facility without the same historic tax-return and servicing package a major bank may require, but the lender still has to identify the borrower and guarantors, verify the security and equity source, understand liabilities and establish a credible repayment event.
The later construction facility is usually a harder test than the site loan. A first-time sponsor who can settle the land may still need an experienced builder, project manager, quantity surveyor or development partner around the project before a construction lender is comfortable. If your exit depends on a construction refinance, test that team requirement before the acquisition facility settles.
From our broking, indicative
Across the pre-consent site files we place, the strongest files have a defendable exit before they have a cheap rate. The recurring problems are a construction refinance that has never been costed, a planning timetable built on optimism rather than evidence, holding costs omitted from the feasibility, and contributed equity that later turns out to be repayable related-party debt.
Indicative only, based on deals we have placed, describing lender behaviour rather than any expectation about the land or its future value. Not a quote and not an offer. Actual terms depend on lender policy and your circumstances at the time of application. As at August 2026. Not financial advice.
Once you have terms, compare the net cash and the exit cost, not just the rate
Two facilities with the same headline rate can deliver different cash at settlement. Check the gross facility, the net advance after retained or capitalised interest, establishment fee, valuation and legal costs, any minimum interest period, extension fee, default rate, discharge cost and the amount the lender expects to receive at your planned exit. A term sheet that solves the purchase but leaves the facility short at settlement is not the cheaper offer. Our fast settlement finance guide shows the same comparison from the urgent-settlement side.
Do not assume an "indicative" term sheet is cost-free if the loan never settles. The term sheet, valuation authority, legal-cost undertaking or other engagement documents may require the borrower to reimburse valuation, legal or due-diligence costs once they are incurred, and some clauses dealing with confidentiality, exclusivity or fees may be intended to operate even where the facility itself is not yet binding. The legal effect depends on the wording, so have the solicitor identify what can still be owed before you accept terms, pay a fee or instruct the valuation.
The routes themselves are covered in depth elsewhere: caveat loans, second mortgage loans, and the glossary entries for first mortgage, registered second mortgage and caveat loan.
What does a lender need before it will quote?
Start with six core credit inputs: the contract, title and plan, written planning position, costed feasibility, evidence of equity and a written exit. Statements of assets and liabilities and identification are then needed to complete credit and documentation. Separating those two groups fixes the common mistake of calling an eight-item file a six-document checklist.
A complete file is faster because the lender can read the price, security, planning timetable, equity and exit together rather than reopening the same scenario every time a missing piece arrives.
| What to provide | Why the lender needs it | What happens if it is missing |
|---|---|---|
| Contract of sale, including special conditions | Price, settlement date, buying entity, conditions and option or nomination mechanics | The facility cannot be sized or dated |
| Current title search and plan | Ownership, easements, covenants, encumbrances and what can be registered | A late title issue can change the value, yield or security |
| Written planning position from a town planner | What is permissible, the assessment pathway, material constraints and a realistic timetable | The exit cannot be dated or tested |
| Costed feasibility including holding costs | Whether the project and the waiting period support the debt | The lender cannot tell whether the facility is adequately funded to its exit |
| Evidence of equity and its source | How much real sponsor money is going in and whether any part is repayable debt | Credit may reclassify the contribution late and re-cut the leverage |
| Written exit, costed and dated | How the site facility gets repaid and what has to occur first | There is no credible short-term facility to write |
| Statement of assets and liabilities for borrowers and guarantors | The sponsor position, contingent liabilities and whether claimed equity exists | Credit remains incomplete even if the site itself works |
| Identification and entity documents | Customer identification and authority for directors, trustees and guarantors | Documentation can stall after approval, when the settlement clock is shortest |
Useful additions depend on the stage. A preliminary quantity surveyor or cost consultant view can test whether the construction assumption is credible before DA, and a short development-experience summary helps a lender understand who is actually delivering the project. If the future construction lender has already indicated the takeout conditions, include those as part of the exit evidence rather than simply writing "refinance to development finance".
How quickly can it settle, and what if you miss the date?
A clean short-term private facility can move quickly, but approval speed and settlement speed are not the same thing. Switchboard's current fast-settlement guidance records indicative formal-approval bands of around 1 to 5 business days for short facilities and around 1 to 2 weeks for larger commercial short-term facilities. A pre-DA site can take longer where the valuation, title, planning position, entity or legal documents are not ready.
Those are indicative bands, not settlement promises. Valuation turnaround, lender legal documents, payout figures on existing debt, signing, title issues and settlement booking can all sit after credit approval. The fastest file is not the one with the most urgent deadline; it is the one where the contract, security, equity and exit are ready at the same time. See the current timing bands and full caveats in our fast settlement finance guide.
Work backwards from the contractual settlement date. Allow for valuation, legal work and at least one round of credit questions. If the timetable does not reach, start the extension conversation then, not in settlement week.
What should you do if the settlement date is going to be missed?
The contract's default machinery decides the legal consequences, and it varies by state and by the words in the contract. Do not assume a generic grace period. Some contracts contain extension mechanisms; others require a formal default or notice-to-complete process before termination rights arise.
The financial exposure can extend beyond the deposit to penalty interest, legal costs and, in some circumstances, damages if the vendor terminates and resells for less. Which consequences actually apply is a solicitor question tied to the contract and state law.
The practical instruction is to run two tracks in parallel: ask the solicitor to open the extension conversation while the finance application is being documented. An extension is often cheaper than emergency debt, but it only solves the problem if the revised date is long enough for the actual finance to settle. Our guide to what a notice to complete means covers that process in detail.
What does it cost to hold the site while you wait?
In metropolitan Melbourne it can now reach 1 per cent of capital improved value a year in vacant residential land tax alone, on top of ordinary land tax, rates and capitalised interest. That rule changed on 1 January 2026. Holding cost is the line item that turns a workable pre-consent deal into a stressed one, because it runs every month whether or not the planning application moves.
There are four layers: interest, which on most of these facilities is capitalised and therefore compounding against your equity; state land tax, which is assessed annually on the taxable value of what you own; a vacant or undeveloped land tax layer where the state has one; and council rates, which many councils strike using differential rating categories that can treat vacant land differently from improved land. Council rating policies are set locally and reviewed each year, so the only reliable figure is the one in your own council's current rating policy and your own rates notice.
The state layer is where the consolidation below matters, because it has not been assembled in one place for a developer audience.
| State and owner type | Land tax starts at | Vacant or undeveloped land layer |
|---|---|---|
| Victoria, general | $50,000 of total taxable value, then $500 from $50,000 to under $100,000, rising through the scale | Vacant residential land tax at 1 per cent of capital improved value on metropolitan Melbourne land undeveloped for five years or more. No threshold and no COVID levy on VRLT |
| Victoria, trust surcharge | $25,000 of total taxable value, then $82 plus 0.375 per cent above $25,000 | Same VRLT layer applies to the land itself, assessed on capital improved value |
| New South Wales, general | General threshold $1,075,000 for the 2026 land tax year, then $100 plus 1.6 per cent above it, assessed against the combined three-year average land value | No vacant land tax. Premium threshold $6,571,000, then $88,036 plus 2 per cent above it |
| Queensland, companies and trustees | $350,000 of total taxable value, then $1,450 plus 1.7 cents for each $1 above $350,000 | No vacant land tax. A 3 per cent surcharge applies to foreign companies and trustees of foreign trusts |
| Queensland, individuals | $600,000 of total taxable value, then $500 plus 1 cent for each $1 above $600,000 | No vacant land tax. Absentee rates apply to foreign individuals |
| South Australia, general | Threshold A of $936,000 for 2026-27, gazetted 4 June 2026, then $0.50 for every $100 above it | No vacant land tax. Trust rates start at $25,000 of total taxable site value |
| Western Australia | $300,000 of aggregated taxable value, then a flat $300 from $300,001 to $420,000 | No vacant land tax. Metropolitan Region Improvement Tax adds 0.14 per cent of unimproved value above $300,000 in the Perth metropolitan region |
| Tasmania, ACT and Northern Territory | Separate scales apply in Tasmania and the ACT. The Northern Territory levies no land tax | No vacant residential land tax equivalent in any of the three. Check the current scale with the relevant revenue office before relying on it |
Rates and thresholds are set by each state and change, so read your own state's current figures before relying on them: SRO Victoria, Revenue NSW, Queensland Revenue Office, RevenueSA and Department of Treasury and Finance WA. All figures above are as at August 2026 and are general information, not tax advice.
The Victorian change, and the three conditions people miss
From 1 January 2026, the State Revenue Office states that VRLT applies to land in metropolitan Melbourne that meets three conditions together, not two. The land must be in a zone other than a non-residential zone, must be capable of residential development, and must have remained undeveloped for a continuous period of five years or more. The zoning condition is the one routinely dropped from summaries, and it is the one that takes a genuinely commercial site out of the net.
"The 5-year period may occur prior to 1 January 2026."
State Revenue Office Victoria, Understanding vacant residential land tax. sro.vic.gov.au. As at August 2026. General information, confirm your own position with the SRO.That single sentence is the part to plan around. A metropolitan Melbourne site bought years ago and held can be liable in the rule's first operating year, because the clock was already running before the rule began.
The rate is a carve-out, and it is worth knowing which side of it you are on. Undeveloped metropolitan Melbourne land is assessed at a flat 1 per cent of capital improved value and does not escalate. The escalating scale of 1 per cent, then 2 per cent, then 3 per cent by consecutive liable years applies to other vacant residential land, not to the undeveloped-land category. On the SRO's current VRLT rates page, "the following lands will be assessed at the rate of 1% of its capital improved value" covers both undeveloped metropolitan land and new residential land unused, unoccupied and unsold for more than three years.
There is also an obligation, not just a cost. Owners must notify the SRO by 15 February, and the SRO's position is that you must notify even if you believe the land is exempt. Incorrect details on an assessment must be raised through the portal within 60 days of receiving it. That is a compliance step with a date on it, and it is missed far more often than the tax itself is disputed.
The SRO also states that VRLT may not apply where the land is being developed for a non-residential use and has not yet been developed that way for an acceptable reason such as delays outside the owner's control, that it has a discretion to extend the five-year period with the relevant factors set out in the Victorian Government Gazette, and that section 34C(4C) of the Land Tax Act 2005 provides for a break in the five-year period where there is a genuine change in ownership. Land incapable of residential development is separately exempt. Whether any of those apply to your site is a question for the SRO or your adviser.
Three Victorian layers most feasibilities miss
Beyond land tax and VRLT there are three further Victorian items that belong in a pre-consent holding cost line. The metropolitan planning levy applies to certain permit applications in metropolitan Melbourne above an annually indexed threshold, charged at $1.30 for every $1,000 of the estimated cost of development, and the certificate has to be obtained before the application is lodged rather than after. The Emergency Services and Volunteers Fund replaced the fire services property levy and is charged through council rates notices, with different rates by property classification.
Working the other way, a primary production land exemption can apply to a parcel still genuinely used for farming while a planning outcome is pursued, which for a fringe or regional site can be the difference between a manageable holding cost and an unmanageable one.
None of the three is optional to check. The levy is a precondition to lodging, the fund appears on a rates notice you may not have seen before settlement, and the exemption has to be applied for rather than assumed. For the cost side of the same problem, see what it costs to hold a development site and land holding costs for builders.
By the numbers
- $487.6 billion against $525.8 billion of limits ADI commercial property exposures measured against commercial property exposure limits, both up 8.7 per cent year on year. The gap between the two is the headroom banks have left to allocate across every commercial property category, of which pre-consent land is the most capital-expensive. APRA Quarterly ADI Property Exposures, March 2026 quarter, published 29 June 2026, as at August 2026. apra.gov.au
- 1 per cent of capital improved value The vacant residential land tax rate applying to land in metropolitan Melbourne that is in a zone other than a non-residential zone, is capable of residential development and has remained undeveloped for a continuous period of five years or more, where the five-year period may have run before the rule began. State Revenue Office Victoria, in effect from 1 January 2026, as at August 2026. sro.vic.gov.au
- 50 per cent max LVR on metro development sites The current headline ceiling shown on Switchboard Finance's private lending page for a metro development site. It is a panel maximum, not a quote or a market-wide rule, and the actual advance can be lower depending on valuation, security, location and exit. Switchboard Finance private lending panel information, read August 2026. switchboardfinance.com.au
- 1 to 5 business days for short-facility formal approval Current indicative Switchboard timing for short private facilities; larger commercial short-term facilities is commonly around 1 to 2 weeks. These are approval or scenario-to-settlement bands, not guarantees, and pre-DA sites can take longer where valuation, planning or legal work is incomplete. Switchboard Finance fast settlement guide, current published timing bands, read August 2026. switchboardfinance.com.au/guides/fast-settlement-finance-australia-guide-2026
- 28 private credit funds, around $29.6 billion The scope of ASIC's private credit surveillance, which issued ten principles for conducting private credit well. Poor practices in private credit remain a 2026 enforcement priority. ASIC Report 820, published November 2025, enforcement priority confirmed 2026, as at August 2026. asic.gov.au
General information only. Figures are indicative where marked and current as at the review date shown. Not financial advice; consider your own circumstances and speak to a broker.
Are the holding costs on vacant land tax deductible?
Not automatically, and the entity that owns the land is usually what decides it. This is the layer almost every feasibility gets wrong, because interest, rates and land tax are modelled as costs and then quietly assumed to be deductible against something.
The provision is section 26-102 of the Income Tax Assessment Act 1997, which has applied since 1 July 2019. It denies a deduction for losses or outgoings relating to holding land where there is no substantial and permanent structure on the land that is in use or available for use, and which has a purpose independent of any other structure. A bare development site is the textbook case. Interest on the acquisition facility, council rates and land tax all sit inside the denial.
Two exclusions do the work for developers. Land that is in use or available for use in carrying on a business is outside the provision, which is why an established developer holding a site for future development is generally unaffected. Separately, and more usefully, the provision does not apply to a corporate tax entity at all. The ATO's view on how the section operates is set out in Taxation Ruling TR 2023/3.
| Who owns the land | Position under section 26-102 | What that means in the feasibility |
|---|---|---|
| Individual not carrying on a business | Denied, unless another exclusion applies | Holding costs are not deductible as incurred and instead go to the cost base of the asset |
| Individual carrying on a development business | Outside the provision where the land is in use or available for use in that business | Whether the activity amounts to carrying on a business is a question of fact, not a label |
| Company | Excluded from the provision as a corporate tax entity | The exclusion applies regardless of whether the company is carrying on a business |
| Single-purpose landholding company | Excluded as a corporate tax entity, even where the business test would be doubtful | The corporate exclusion is doing the work here, not the business test, which is worth understanding before restructuring |
| Trust | Depends on the type of trust and on whether the land is used in carrying on a business | Certain trusts are excluded and others are not, so this is specific advice rather than a general answer |
| Self managed superannuation fund | Not within the superannuation fund exclusion that applies to larger funds | One of several reasons an SMSF is a difficult owner for undeveloped land |
Where a deduction is denied, the amount is not automatically lost, but whether it can be included in the CGT cost base depends on the cost-base rules and the taxpayer's circumstances. That defers or changes the tax treatment rather than creating a current deduction. That distinction matters most where the eventual profit is taxed as ordinary income rather than as a capital gain, because a cost base does less work in that scenario.
Read together with the section above, this is the sharpest argument for getting the entity right at the start. The same site, held for the same two years, with the same capitalised interest, produces a materially different after-tax cost depending on who is on the title. Tax treatment turns on your own facts and this is general information, not tax advice, so confirm your position with your accountant before you sign anything. See also how capitalised interest works and the wider question of which entity should buy the land.
What does a rezoning cost you in Victoria?
Up to half the uplift. Victoria's windfall gains tax takes 50 per cent of the value increase once that increase reaches $500,000, and it lands on whoever owns the land on the day the rezoning takes effect. If your strategy is to buy land and change its zone, this is the largest single line in the feasibility and it is not a financing cost.
The tax applies where a rezoning under the Planning and Environment Act 1987 produces a taxable value uplift of more than $100,000. The uplift is the difference between the capital improved value of the land immediately before the rezoning and immediately after it, and no deductions are allowed against it. A change between schedules within the same zone is not a rezoning for this purpose.
| Taxable value uplift | How it is taxed | Worked liability |
|---|---|---|
| $100,000 or less | Not taxed | Nil |
| More than $100,000 and less than $500,000 | 62.5 per cent of the part of the uplift above $100,000 | A $400,000 uplift produces $187,500, because $300,000 is taxed at 62.5 per cent |
| $500,000 or more | 50 per cent of the entire uplift, with no tax-free slice | A $600,000 uplift produces $300,000, and a $3 million uplift produces $1.5 million |
| Deferred liability | Deferrable to the next dutiable transaction or 30 years, whichever comes first, with interest accruing | Interest accrues at the Victorian 10-year bond rate, so a long deferral can materially exceed the original assessment |
The two bands are designed to meet rather than to create a cliff. At exactly $500,000 of uplift both formulas produce the same figure, so there is no point at which one extra dollar of uplift costs tens of thousands. What it does mean is that any serious rezoning play, with an uplift in the millions, sits squarely in the flat 50 per cent band from the outset.
Three points that change the funding, not just the tax
Deferral is a liability, not relief. Electing to defer moves the payment date to the next dutiable transaction or the 30-year mark, but interest accrues in the meantime and the amount is secured against the land. Any lender looking at the site will see it, and it sits ahead of the equity in every scenario where the land is sold.
The vendor cannot hand it to you. From 1 January 2024, a vendor must not pass on a known windfall gains tax liability to a purchaser under a contract of sale of land. Where a rezoning lands between contract and settlement, the allocation of that liability is a legal question governed by that rule and by the words of the contract, not a matter for negotiation at settlement.
Grouping applies. Where a person or group owns more than one parcel rezoned at the same time, the uplifts are added together to work out the tax, and grouping rules reach related companies, trusts and joint owners. Assembling a site across several entities does not divide the liability into separate thresholds.
Exemptions exist and they are narrower than people hope. Residential land that includes a home is exempt, including primary production land with a home on it, up to two hectares. Rezonings to most rural zones are exempt. Land within the Growth Areas Infrastructure Contribution area is not caught on its first rezoning, though a later one can be. Charitable land is exempt where the charitable use continues for 15 years. Whether your parcel falls inside any of those is a question for the SRO windfall gains tax guidance or your adviser, not an assumption for the feasibility.
No other state runs an equivalent tax on rezoning uplift, which is why a Victorian rezoning play and a New South Wales one are not the same deal wearing different postcodes. For what the waiting itself costs, see what it costs to hold a development site.
What if you are buying under an option or a conditional contract?
Then the finance question becomes both what can the lender secure before completion and what rights do you actually have to pursue the planning outcome. Until the transfer completes you may not own the land that a first mortgage would normally be registered over, so the option, contract and state planning rules have to be read before the facility is offered.
Under a put and call option, the parties hold contractual rights that can lead to a later sale; under a conditional contract, the parties may already be bound to a sale that only completes once stated conditions are satisfied. The exact rights, caveatable interests, assignment rules and duty consequences depend on the document and jurisdiction, so the lender and property solicitor need the actual agreement rather than a summary of it.
| Acquisition structure | What a lender may be able to take before completion | What that means for funding |
|---|---|---|
| Unconditional contract | A registered first mortgage once settlement transfers title to the borrower | The straightforward acquisition case and the basis most first-mortgage terms assume |
| Conditional contract | Usually no mortgage over the target land until completion; other security depends on the deal | The facility timetable must match the condition and completion timetable |
| Put and call option | No registered mortgage over the land before ownership transfers; a caveat or security over contractual rights may be possible depending on the option | Funding the option fee, exercise and completion may be separate finance events |
| Option assigned or nominated | Security follows the entity that ultimately acquires title and whatever rights exist before then | Entity, duty and lender documentation need to be resolved before the assignment or nomination is treated as harmless |
| Vendor finance or terms contract | The vendor may retain contractual or proprietary rights that affect ranking | A third-party lender may require a priority or intercreditor arrangement, or may decline the structure |
| Joint venture or development agreement | Depends on who owns the land and what the agreement allows to be encumbered | The agreement must be reviewed before assuming the project company can grant the proposed security |
Can you pursue a DA or planning permit before you own the land?
Often yes, but the owner's formal role is not identical across Australia. In New South Wales, the Planning Portal requires owner's consent as part of a development application and current portal guidance says an application cannot be determined without the required owner consent. In Queensland, section 51 of the Planning Act requires written owner consent for specified application types, including material change of use and reconfiguring a lot where the applicant is not the owner. In Victoria, an applicant who is not the owner must provide the owner's details and notify the owner; the application is signed by the owner or accompanied by a declaration that the owner has been notified. These are different legal mechanisms, so a blanket "owner consent is always required in the same way" is wrong.
Official guidance: NSW Planning Portal, Queensland Planning owner-consent guidance and Planning Victoria. Your option or contract should give you the practical rights needed to lodge, respond to requests, amend plans and continue the application for the whole assessment period, subject to the law in the relevant state.
What can a lender actually secure before completion?
A registered mortgage over the target land normally requires the mortgagor to hold the relevant registered interest, so it is not available in the ordinary acquisition form until title transfers. A caveat may be available where the option or contract creates a caveatable equitable interest, but that turns on the wording and state law. Security over contractual rights can also be documented, but an interest in land is not converted into ordinary personal property simply because a financier wants collateral.
The practical result is that some lenders will fund the option or exercise stage against other security, some will rely on a properly documented caveatable interest, and some will wait until completion so a registered mortgage can be taken. Raise the structure at the first conversation rather than after a term sheet is issued.
Can assigning or nominating an option create extra duty?
Yes, it can. The treatment of assignments, nominations, sub-sales and options is state-specific, and a change in the acquiring entity can create an additional dutiable event or alter the duty calculation. Do not assume that leaving the buying entity open is a free way to preserve flexibility. Have the solicitor and accountant confirm the duty outcome in the relevant state before the option or contract is signed.
Where the option fee or exercise money needs funding on a short timetable, see caveat loan or development finance at acquisition, and start the structural conversation from private lending.
Which entity should buy the land, and does the credit law apply?
There is no universally right buying entity. Companies and trusts are common in property development, but the entity on the contract can change the credit-law perimeter, duty, land tax, income-tax and GST treatment, and moving the land later can itself trigger cost. Choose the structure for the whole acquisition-to-exit plan, not simply for whichever entity can sign fastest at exchange.
Start with the perimeter. The National Credit Code applies to the provision of credit if, when the contract is entered into, "the debtor is a natural person or a strata corporation" and the credit is provided or intended to be provided wholly or predominantly "for personal, domestic or household purposes" or "to purchase, renovate or improve residential property for investment purposes". A site bought in a personal name for a residential development can therefore sit closer to the consumer regime than developers expect. Loans to companies are not subject to the consumer credit legislation.
The operative mechanism where a natural person does borrow is the declaration in section 13, not the perimeter itself:
"It is presumed for the purposes of this Code that credit is not provided or intended to be provided under a contract wholly or predominantly for any or all of the following purposes (a Code purpose): (a) for personal, domestic or household purposes; (b) to purchase, renovate or improve residential property for investment purposes; (c) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; if the debtor declares, before entering the contract, that the credit is to be applied wholly or predominantly for a purpose that is not a Code purpose, unless the contrary is established."
National Credit Code, Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth), section 13(2). As at August 2026. General information only, not legal advice.The declaration is not a formality and it is not a way around anything. Section 13 goes on to make the declaration ineffective where the credit provider or a prescribed person knew, or had reason to believe, or would have known had reasonable inquiries been made, that the credit was in fact to be applied wholly or predominantly for a Code purpose. It also requires the declaration to be substantially in the prescribed form, and it creates an offence for conduct that induces a debtor to make a false or misleading declaration. In practice, a declaration signed against the facts protects nobody.
Company or trust on the contract
- Sits outside the consumer credit regime, which is what private development lenders are set up for
- Land tax assessed on the company or trustee scale, which starts lower in some states and higher in others
- Separates the site from personal assets, subject to whatever guarantees are given
- Makes bringing in a partner or an investor a change of shareholding rather than a change of title
- Matches the way a later construction facility will want the borrower structured
Personal name on the contract
- Can fall inside the National Credit Code where the purpose is residential investment
- Narrows the lender panel sharply, because many development lenders will not write consumer-regulated credit
- Puts the land into your personal land tax aggregation with everything else you own
- Makes a later transfer to a development entity a dutiable transaction in most states
- Relies on a declaration that must be true, in the prescribed form, and consistent with what the lender's enquiries would find
The duty point in that second column is the expensive one. Buying in a personal name because it is quicker at exchange, then transferring to a development entity once the structure is sorted, is usually a dutiable transfer assessed a second time on the full value. The cheap decision at exchange becomes the costly one at restructure, and no lender can undo it afterwards.
A company is not a duty-free exit either, and this is the mirror image people miss. Selling the shares in a landholding company can attract landholder duty where the company's land holdings meet the state threshold, which in New South Wales is $2 million of land value. Bringing in a partner by issuing or transferring shares is a relevant acquisition in its own right rather than a way around a transfer, so the structure that solves the entry problem has to be checked against the exit you actually intend.
Is the profit a capital gain or ordinary income?
Usually ordinary income, and that question is decided by what you do rather than by which entity does it. Where land is acquired and developed as part of a business or an isolated profit-making scheme, the proceeds are generally assessable as ordinary income, which means the capital gains discount is not available on the profit. That single point often outweighs everything else in the structure discussion, and it interacts directly with the deductibility question above, because a cost base does less work when the eventual profit is taxed as income rather than as a gain.
Two related items belong on the same list and are routinely left to the end. GST on the sale of new residential premises, and whether the margin scheme is available to you, changes the revenue line rather than the cost line and has to be settled before you price the site. And where a development entity is used, the company tax rate that applies to it depends on whether it qualifies as a base rate entity. All three are accountant questions and all three should be answered before exchange, not after consent.
If the buyer is an SMSF
From 10 August 2026, the position on new SMSF limited recourse borrowing arrangements changed. Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 adds a requirement that, for real property acquired under the LRBA exception, the asset be business real property. The Schedule also preserves pre-commencement borrowing arrangements, qualifying refinances of them, and acquisitions made under arrangements entered into before commencement even where settlement occurs later.
One point is routinely missed: the asset must continue to be business real property for the life of the arrangement, not merely qualify at the moment it is acquired, so a change of use partway through is a compliance question and not just a valuation one. Whether a specific parcel of undeveloped development land meets the business real property test is a technical question for your SMSF adviser and the ATO, and it is not a question to answer by assumption. An SMSF can still acquire property without borrowing, subject to the fund's own investment strategy and rules.
There is a second restriction that stops most SMSF development regardless of the business real property question. Borrowed money under a limited recourse borrowing arrangement cannot be used to improve the asset, and any improvement must not change the character of the asset from the one that was acquired. A vacant parcel developed into dwellings is a change of character on almost any reading, which is why an SMSF is rarely the right owner for a site being bought in order to build on it. Take this to your SMSF adviser before you commit rather than after settlement.
If the buyer is a foreign person
Holding vacant residential land and waiting is structurally not available. The standard conditions on a foreign investment approval for vacant residential land include:
"construction of all dwelling(s) being completed within four years from the date of notice of approval"
"the foreign person not selling, transferring, or otherwise disposing of their interest in the land prior to construction of all dwelling(s) being completed"
Foreign Investment Review Board, Guidance Note 6 Residential Land, Version 3 (14 March 2025). foreigninvestment.gov.au. As at August 2026. Conditions applying to approvals, confirm your own position with FIRB.Read together, those two conditions close the loop: you must build within four years, and you cannot exit before you have. Structure decisions carry tax, duty and legal consequences well beyond the loan, so take advice from your accountant and lawyer before you sign. For how lenders read each structure, see commercial property loans and property held in a trust or company as security.
What happens to the finance if the DA is refused or the approved yield is lower than expected?
A weaker planning outcome can break both the value and the exit, so it is a different finance problem from a simple delay. If the DA is refused, the approved yield is materially lower, or consent carries costly conditions, the lender may be looking at a site worth less than the feasibility assumed and a construction refinance that no longer repays the holding facility on the original numbers.
| Planning outcome | What changes financially | What the borrower normally has to solve next |
|---|---|---|
| Decision delayed, scheme unchanged | Interest and holding costs keep accruing while the original valuation and exit may still be broadly intact | Extension evidence, updated LVR and enough term to reach the revised planning date |
| Council or authority requires major redesign | More professional fees, more time and a risk that the revised scheme supports less value or profit | Re-cut the feasibility and ask whether the current lender will fund the longer path before committing to the redesign |
| Approved yield is lower than modelled | Lower end value or fewer saleable units can reduce residual land value and the construction facility available later | Obtain a revised feasibility and valuation, then calculate whether extra equity is needed to refinance or build |
| Consent carries expensive conditions or contributions | The project can be approved yet still become more expensive to deliver, weakening profit and total-cost leverage | Price every material condition into the QS and construction takeout before treating the DA as finance-ready |
| DA refused | The expected construction exit may disappear and the site may need to be valued without the assumed consent | Choose between appeal/re-lodgement, refinance for a longer hold, additional equity or sale, with legal and planning advice |
| Rezoning or planning proposal fails | The land may revert to the value supported by its existing controls rather than the uplift assumed in the purchase feasibility | Revalue the site on the actual planning position and decide whether the remaining strategy supports the debt |
The lender does not finance the words "DA refused" in isolation; it finances the revised path from that date. A stronger extension or refinance request shows the refusal or revised consent, planner and solicitor advice on the next step, a new timetable, an updated feasibility and valuation, the LVR after capitalised interest, and the amount of fresh equity available if the original exit no longer works.
If the consent has lapsed or an existing approval needs to be amended, see our guide to refinancing a site when a DA has lapsed or changed. If the project still works but only on a lower yield, re-run the feasibility a lender actually tests before asking for more debt.
What happens to the finance once DA approval is granted?
DA approval moves the project from site-hold finance toward construction finance, but the refinance is not automatic. The construction lender re-tests the approved scheme, the as-if-complete valuation, total development cost, equity, sponsor, builder and exit, plus any pre-sale or pre-lease requirement in its policy.
| Takeout gate | What the construction lender is testing | What can still stop the refinance after DA |
|---|---|---|
| Approved scheme | The actual consent, approved plans, conditions and whether material approvals remain outstanding | A consent that is materially different from the feasibility or carries expensive conditions |
| As-if-complete valuation | End value of the approved project on the lender's valuation instructions | The end value is lower than the feasibility assumed, increasing the equity requirement |
| Construction cost and QS | Whether the build budget, contingencies, professional fees and remaining costs are adequate | A QS or lender cost review comes in above the developer's budget |
| Equity and site debt | How much sponsor equity remains after paying out the site loan, capitalised interest and costs | The holding facility has grown and consumed the equity buffer needed for construction |
| Builder and delivery team | Builder capability, contract form, development experience and delivery risk | No acceptable builder, incomplete contract or a sponsor track record outside lender appetite |
| Pre-sales or pre-leases where required | Whether the project's sales or leasing evidence meets that lender's policy and any relevant capital-treatment conditions | DA is approved but the required debt coverage or qualifying sales evidence is not yet there |
| Exit and contingency | How the construction facility is ultimately repaid and what happens if sales, leasing or completion are late | The project has a construction plan but no credible debt exit or contingency |
This is why the takeout should be tested before the acquisition loan settles. If the construction lender is only approached after the DA arrives, valuation, QS, builder, pre-sale and legal conditions can consume months while the site facility keeps capitalising interest. Engage the likely construction lender early enough that the requirements are known before the site loan approaches expiry.
Can the NSW Pre-sale Finance Guarantee help after DA approval?
For an eligible NSW residential project, potentially yes. As at August 2026, the NSW Government's $1 billion revolving Pre-sale Finance Guarantee is designed for projects that have planning and development approval but cannot yet draw construction funding because the lender requires more pre-sales. The published eligibility includes an indicative lender approval setting out the pre-sale requirement, planning/development approval, at least four homes and the ability to achieve substantial construction commencement within six months of formal program contracts. Project and dwelling-value caps also apply, and the program charges application, establishment and line fees.
The sequence is important: this program is not a way to finance the land before DA. It sits after planning approval and after the construction lender has identified the pre-sale shortfall. Treat it as a possible takeout enabler for an eligible NSW project, not as a substitute for the acquisition facility or a guarantee that construction finance will be approved.
In New South Wales, approval pathway and timing also depend on the type and scale of development, and a rezoning is a separate planning-instrument process rather than merely a slower DA. If the project depends on a planning proposal or rezoning, term the site facility against that actual pathway rather than a generic DA timetable.
For the next stage, see development finance, what lenders test in the feasibility, and how the pre-construction funding phase hands over to the build.
Can DA approval increase the site's value and let you refinance or release equity?
Sometimes. DA approval can increase the lender-accepted value of a development site by replacing part of the planning uncertainty with an approved scheme, but the uplift only becomes usable borrowing capacity if a new lender-instructed valuation recognises it and the lender's leverage, total-cost, equity and exit tests still allow more debt.
Keep two valuation questions separate. An approved-site valuation asks what the land is worth now with the consent in place. An as-if-complete valuation asks what the finished approved project will be worth after construction. The first can change the refinance capacity against the site; the second is one of the inputs used to size the later construction facility.
| What changed after DA | What the new lender tests | Can cash be released? |
|---|---|---|
| Approved-site value rises and the existing payout is low | New valuation, site-stage LVR, payout, fees and the next exit | Potentially, if the lender permits cash-out and enough headroom remains after repaying the old facility |
| Value rises but capitalised interest has consumed the headroom | The current payout against the new value, not the original advance | Little or none; the uplift may only be enough to refinance the larger payout |
| DA is approved for less than the feasibility assumed | Approved yield, conditions, revised residual land value and construction economics | Possibly not; approval can exist without creating the expected valuation uplift |
| Construction lender requires equity first | How much sponsor equity must remain in the project before lender drawdowns begin | A site refinance may technically allow it but withdrawing equity can weaken or prevent the construction takeout |
Do not count DA uplift twice. If your construction feasibility already relies on the land equity created by the approved value, pulling that equity out before the construction loan can recreate the very shortfall the DA was supposed to solve. Ask the proposed construction lender how much land equity must remain before agreeing to cash-out on the site refinance. See development finance for the build-stage facility and capitalised interest for how the payout grows while planning is underway.
What happens if the loan expires before the DA lands?
The facility has to be extended, refinanced or repaid, and none of the three is automatic. This is the most common way a sound pre-consent deal turns into a distressed one, and it almost never happens because the site was wrong.
The mechanism is capitalised interest. On most of these facilities interest is not paid monthly, it is added to the balance, so the loan grows every month while the land does not. A facility that started with comfortable headroom against as-is value can be sitting much closer to its limit twelve months later without a single thing having gone wrong with the planning application. When you then ask for an extension, the lender is assessing a larger loan against the same security, which is a materially different request from the one it originally approved.
What a lender actually looks at on an extension is narrow and predictable: where the application genuinely sits, evidenced rather than asserted; what the loan to value looks like after capitalised interest; whether the exit has moved, and if so, to when and on what basis; and whether there is equity available to reduce the balance or fund the extended term. Those four answers give the lender something real to assess. They do not guarantee an extension, but they are materially stronger than arriving at expiry with only an assurance that approval is "imminent".
Two practical protections are worth building in from the start. Term the facility against the planning authority's real timetable rather than the optimistic one, and hold an equity buffer specifically for a second extension rather than a first. If consent lapses or has to be amended rather than merely delayed, that is a different problem with a different answer, and it is covered in our guide to refinancing a site when the DA has lapsed or been amended. For the arithmetic of the growing balance, see how capitalised interest works.
A development site can be financed before DA approval. The important distinction is not "bank versus no bank" but which lender can hold the project at this stage, on what valuation basis, with what equity, and against what exit. APRA's ADC rules can make some bank exposures more capital-intensive, but they are not a prohibition on pre-DA lending.
The finance problem starts before exchange. Test the planning yield, title, physical constraints, tax treatment, as-is valuation and settlement sources together, then run a shadow construction takeout so you know what must be true after DA. If you only prove that you can settle, you have solved the first day of the loan rather than the exit.
Size equity against the lender's as-is figure, compare net advance rather than gross facility, keep the planning evidence current, and start the construction refinance before the site loan is close to expiry. If planning comes back weaker than expected, re-cut the value and exit immediately. If DA creates value, confirm how much of that uplift must remain as equity for construction before you release any cash.
Key takeaway: buy the site with both exits tested. Know what you will do if planning disappoints, and know what the next lender needs if approval succeeds.Frequently asked questions
Yes, but the lender is usually a private or non-bank lender rather than a major bank. Without a consent the exposure sits in a capital category that costs a bank more to hold, so the appetite that remains is priced accordingly or not offered at all. A private lender assesses the land as it stands today, with the decision resting on the security, a costed exit and the cost of holding the site. Switchboard arranges these through private lending.
Because of how the exposure is capitalised, not because of a prohibition. Under APRA Prudential Standard APS 112 the lower 100 per cent risk weight on a residential land acquisition, development and construction exposure depends on conditions that include qualifying pre-sales of at least 100 per cent of total debt above the five million dollar threshold. A site with no consent cannot carry qualifying pre-sales, so the higher 150 per cent weight applies instead. APRA has proposed halving that pre-sales test, but it is a consultation rather than a rule, so where non-bank development funding sits today is the practical answer.
Land bank loans and land bank funding are informal names for finance secured against undeveloped land that is being held rather than built on. For a developer that means a facility over a site acquired ahead of a planning outcome, priced and termed for a holding period. They are not product names used by lenders and they should not be confused with retail land banking investment schemes, which ASIC lists under its investment warnings.
In Victoria you may pay both ordinary land tax and, from 1 January 2026, vacant residential land tax on undeveloped land. The State Revenue Office states that VRLT applies to land in metropolitan Melbourne that is in a zone other than a non-residential zone, is capable of residential development and has remained undeveloped for a continuous period of five years or more, assessed at 1 per cent of its capital improved value, and that the five-year period may occur prior to 1 January 2026. Owners must notify the SRO by 15 February, even if they believe the land is exempt, and factor the holding cost into the feasibility.
Up to half the uplift. Windfall gains tax applies where a rezoning produces a taxable value uplift of more than $100,000, charged at 62.5 per cent of the part above $100,000 until the uplift reaches $500,000, and at 50 per cent of the entire uplift from that point. It can be deferred to the next dutiable transaction or 30 years with interest accruing, and from 1 January 2024 a vendor must not pass a known liability to a purchaser. Residential land with a home is exempt up to two hectares. Factor it into what it costs to hold the site before you offer.
Often not, and the entity that owns the land is usually what decides it. Interest, council rates and land tax on a bare site all sit inside the same rule. Section 26-102 of the Income Tax Assessment Act 1997 denies deductions for costs of holding land with no substantial and permanent structure in use or available for use on it, which captures interest, rates and land tax on a bare development site. Land used or available for use in carrying on a business is excluded, and the provision does not apply to a corporate tax entity at all. Denied amounts generally go to the cost base instead, so confirm your position with your accountant and see how capitalised interest works.
Most development sites are bought in a company or a trust rather than a personal name, and the credit law is one reason why. The National Credit Code applies where the debtor is a natural person or strata corporation and the credit is for personal, domestic or household purposes, or to purchase, renovate or improve residential property for investment purposes, so a purchase in a personal name can fall inside the consumer regime. Moving the land into a company later is usually a dutiable transfer, so the cheap decision at exchange becomes the expensive one at restructure. Take advice before you sign, and see how lenders read property held in a trust or company as security.
From 10 August 2026 a limited recourse borrowing arrangement can only be used to acquire real property if that property is business real property, so borrowing to buy other real property under a new LRBA is no longer available. Existing arrangements entered into before that date, refinances of them, and contracts exchanged earlier that settle afterwards are not affected. The asset must also continue to be business real property for the life of the arrangement, and borrowed money cannot be used to improve it. Take this to your SMSF adviser, and see how lenders read each ownership structure.
The facility has to be extended, refinanced or repaid, and none of those is automatic. A lender assesses an extension on where the application genuinely sits, what the loan to value looks like once capitalised interest is added, whether the exit has moved, and whether equity is available to reduce the balance. Go to the lender roughly three months out with evidence rather than at expiry with an assurance, and see how capitalised interest works on the balance while you wait.
There is no single deposit percentage because the real equity requirement is driven by the lender's as-is valuation, its leverage limit and the costs that sit outside the advance. If the contract price is above the as-is value, you fund that valuation gap as well as duty, legals and lender costs. Work from the lender-accepted value before exchange rather than assuming the deposit in the contract is the total cash requirement.
Site acquisition finance is short-term funding used to buy and hold a development site before construction finance is ready. It can cover the acquisition and holding period while planning, valuation and construction-takeout conditions are progressed. The intended exit is normally construction finance, a sale or another refinance rather than an indefinite land loan.
Not always in the same form a bank would require, but "no-doc" does not mean no assessment. A business-purpose private lender may place more weight on the site, equity, liabilities and exit than on historic income servicing, while still requiring identification, entity documents, assets and liabilities, evidence of the equity source and enough information to understand the borrower and repayment event. Construction finance later can require a much fuller project and sponsor assessment.
Englobo land is a large undeveloped parcel valued and sold in one line rather than as separate finished lots. For finance, that matters because the valuer discounts the time, cost and risk required to turn the parcel into saleable lots or completed product. A residential short-form valuation is not a substitute for a development-site valuation on that basis.
Sometimes, but the lender first has to understand what interest exists before completion and what security can actually be taken. A registered mortgage over the target land normally waits until title transfers; a caveat or security over contractual rights may be possible depending on the agreement and state law. Funding the option fee, exercise and settlement can therefore be separate finance events.
Often yes, but the owner's formal role differs by state. NSW requires owner consent for a DA; Queensland requires written owner consent for specified application types where the applicant is not the owner; Victoria generally requires the owner to sign or the applicant to declare that the owner has been notified. The option should give you the practical rights needed to pursue, amend and continue the application, and your solicitor should check your state before you sign.
The contract and state law decide the consequences. An extension may be available, but doing nothing can expose you to penalty interest, legal costs, the deposit and potentially further damages. Run the extension discussion through your solicitor at the same time as the finance, because approval speed does not matter if the legal and settlement work cannot finish before the contractual deadline.
Sometimes. A first-time developer has less delivery history for the lender to rely on, so the equity, site, planning evidence, feasibility, guarantees, professional team and exit usually carry more weight. The site acquisition loan may be possible before the borrower can satisfy a later construction lender, which is why the builder, project manager, quantity surveyor and construction takeout should be tested before the land facility settles.
The lender sizes from its accepted valuation basis, not from the price you agreed. If the as-is value comes in below the contract price, the available debt can fall while duty and the purchase price stay the same, so the shortfall becomes extra equity. That is why an indicative as-is view before exchange is one of the most valuable pieces of finance due diligence on a pre-DA site.
Sometimes. Equity in another property can be released through a separate refinance, second mortgage or a stretch against the senior if the security and lender policy support it. Treat that as its own transaction with its own valuation, consent, legal and settlement timetable, and disclose the source of funds to the site lender so debt is not mistaken for contributed equity.
No. DA approval removes a major planning uncertainty, but the construction lender still tests the approved scheme, as-if-complete valuation, build cost and QS position, equity, sponsor and builder, plus any pre-sale or pre-lease condition in its policy. Start that takeout process before the site facility expires rather than waiting for approval day, because capitalised interest keeps running in the meantime.
Only where the planning and building approvals allow it and the current lender and insurer are comfortable with the works. Demolition or early works can change the lender's security, valuation and risk position, and a future construction lender may not reimburse work completed outside its approved draw process. Get written legal, planning and lender confirmation before altering the site.
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