How Property Development Finance Works: Costs, Presales and Approval
Property Lending
GRV and TDC · Feasibility not income · Business purpose credit
How Property Development Finance Works: Costs, Presales and Approval
Property development finance is one of the most misunderstood corners of business lending, because it is assessed on the project, not on you. This guide explains how it works from the ground up: the numbers lenders use, whether you need presales, how funds are drawn down, what it costs, and what gets a deal approved or declined. General information to help you plan, not financial advice.
Quick Answer
Property development finance is business-purpose funding that covers the full lifecycle of a property development, from site acquisition through construction to completion and exit. Lenders size it on the project's feasibility, not your personal income, and release funds in stages as the build progresses.
Indicative terms at a glance, July 2026
The figures below summarise the indicative shape of Australian property development finance as at July 2026, based on development deals we place as brokers. They are indicative ranges only, not a quote, not an offer and not an approval likelihood. Actual terms depend on the lender, the project, the location and market conditions at the time of application.
Indicative and general only, as at July 2026, based on development deals we have placed. Not financial advice. Detail on each line sits in the sections below.
What is property development finance?
Property development finance is a business-purpose facility that funds a property development across its whole lifecycle, from buying the site to building it out, completing it and selling or refinancing at the end. Unlike a home loan, it is assessed on the numbers of the project itself, the projected end value, the total cost to build and a credible exit, rather than on your salary or personal serviceability.
Interest is usually capitalised into the facility, so there are no monthly repayments during the build, and the money is drawn down in stages as work is certified. Most development finance is provided to a company or trust and is treated as commercial lending, which changes how it is regulated. If you want the fundamentals first, our development finance glossary entry and the walk-through on how development finance works both start from the ground up.
How does property development finance work? The funding lifecycle
Property development finance works as a single facility that moves through set stages as the project moves. The lender approves a total facility against the project's feasibility, then releases money in tranches: first to help settle the site, then progressively to fund construction as an independent surveyor certifies each stage. Interest is typically capitalised, meaning it is added to the loan balance rather than paid monthly, so the project carries itself until it produces income at completion.
The same shape holds whether you are running a large multi-unit project or a first small build, as our guide to development finance for smaller-scale builders explains. Where a site has to be secured before the main facility is ready, a short-term acquisition loan can hold it to settlement, as our caveat loans guide explains.
How lenders size a development loan: GRV, TDC, LVR and LTC
Lenders size a development loan against four numbers, not your income. The two that matter most are gross realisation value (GRV), the projected value of the finished project, and total development cost (TDC), the all-in cost to deliver it. The facility is then expressed as a loan to value ratio (LVR, the facility as a percentage of GRV) and a loan to cost ratio (LTC, the facility as a percentage of TDC), and the lender lends to whichever limit is reached first.
GRV is assessed net of GST where the margin scheme or GST at settlement applies, so the usable end value is lower than the headline sale prices. The end value is set by an independent valuer, and the cost side is tested against the building contract, which is why clean definitions here matter more than any single rate.
Do you need presales? Qualifying presales and presale cover
You do not always need presales. Many non-bank and private lenders will fund a development with no presales where the feasibility is strong and the exit is credible, though presales can lift leverage and lower pricing. A qualifying presale is a genuine, arm's length sale, usually unconditional or with only limited conditions, a real deposit, a sensible sunset clause and limits on how much of the project any single purchaser can take.
Lenders express the requirement as a presale cover or debt cover ratio, meaning presale proceeds must cover a set proportion of the debt before or during the build. Our guide to development finance with no presales covers when lenders waive them. For bank lenders, presale and valuation expectations sit within APRA's prudential guidance on commercial property lending, APG 220.
The quantity surveyor, staged drawdowns and progress claims
An independent quantity surveyor is the gatekeeper of the money. Before the first construction drawdown, the lender appoints a quantity surveyor to review the build contract, the budget and the program; during the build, the surveyor inspects the site and certifies each stage before funds are released. No certified progress means no drawdown, which is why a realistic program and a solid fixed-price contract matter.
The surveyor also tracks cost to complete, checking that the remaining facility plus any contingency is still enough to finish the job. You can read more on how staged drawdowns and their costs work in practice.
What development finance costs: interest, fees and structure
Development finance is priced as a package of costs, not a single rate. Interest is usually capitalised, so instead of monthly repayments it accrues and is added to the balance, then repaid at exit. On top of interest you will typically see an establishment or line fee, quantity surveyor and valuation fees, legal costs, an ongoing monitoring fee and sometimes an exit fee, plus a minimum interest period that sets a floor on how much interest the facility earns even if you repay early.
Because property development finance is business-purpose lending, the consumer comparison rate does not apply, and the way interest is capitalised means the real cost is the total drawn at exit, not a headline monthly figure.
From our broking, indicative
Across the development deals we place, a few patterns hold often enough to be worth sharing as indicative only. They are not a quote and not an approval.
- Senior debt indicatively to around 65 to 70 per cent of gross realisation value, and around 65 to 80 per cent of total development cost, as at 2 July 2026, varies by lender and project.
- Developer equity typically around 20 to 35 per cent of total development cost, and land equity can often count toward it.
- Facility sizes we commonly see run from about $500K to $15M and beyond, with terms around 12 to 24 months plus extension options for sell-down.
- Indicative terms often come back within about 24 to 48 hours, with formal approval commonly around 2 to 4 weeks, materially faster than a typical 8 to 12 week bank path.
- Non-bank senior pricing sits above bank senior pricing, and mezzanine sits above senior; treat these as a relativity, not a rate you will get.
Indicative and general only, based on development deals we have placed, as at 2 July 2026. Not a quote, not an offer, not an approval likelihood and not a return. Actual terms depend on the lender, the project, the location and market conditions at the time of application. Not financial advice.
Is property development finance regulated? Business purpose, the National Credit Code, APRA and ASIC
Most property development finance is business-purpose lending, which sits largely outside Australia's consumer credit laws. ASIC's guidance is that loans to companies are not subject to the National Consumer Credit Protection Act 2009, and that a loan is only caught as consumer credit where it is wholly or predominantly, meaning more than half, for personal, domestic or household purposes (ASIC INFO 101, reissued October 2020). Because most developments are run through a company or trust, the National Credit Code generally does not apply, though a loan to an individual to build residential dwellings can still be regulated. This is general information, not legal advice, and your structure determines the position.
Commercial loans also carry the lowest level of legal protection. ASIC states plainly that the law provides the lowest level of protection to commercial loans, including loans to small businesses (ASIC INFO 207). Lenders that only provide commercial loans are not required to hold a credit licence or be members of AFCA, although general ASIC Act protections against unconscionable conduct, misleading or deceptive conduct and unfair small-business contract terms still apply, with courts setting a high bar for unconscionability in commercial lending.
AFCA can still consider some small-business complaints. Where a lender is an AFCA member, AFCA can consider complaints from a small business, defined in AFCA's rules as a primary producer or other business with fewer than 100 employees, so check membership before you assume a dispute path is open. For bank lenders, APRA's prudential guidance on commercial property lending, APG 220, sets expectations on valuation, presales and serviceability. To size the banks, ADIs held about $464.1 billion in commercial property exposures as at June 2025 (APRA, an aggregate bank exposure level rather than a finance cost), and non-bank and private funders sit outside that figure. That is where much specialist development finance is written, and the regulator has now put numbers and scrutiny around it. ASIC's independent review of private credit, Report 814 (September 2025), estimates the Australian private credit market at around $200 billion, with approximately half of that real-estate-related, and describes real estate development lending as effectively negative cash-flow lending, where interest is capitalised or paid from capital drawdowns and repayment comes from selling or refinancing the completed project over a lifecycle that can run 36 to 60 months. ASIC followed with Report 820 (November 2025), a surveillance of 28 retail and wholesale private credit funds managing about $29.8 billion, setting out ten principles for private credit done well, and has since named poor private credit practices as a 2026 enforcement priority, flagging property development exposure specifically given rising build costs, project delays, soft presales and unsold stock. For a developer borrowing from the private credit market, the practical takeaway is that fee structures, valuation bases and default terms in this sector vary widely, so read the term sheet closely and take independent advice before you sign.
Development finance vs a construction loan, and where commercial, private and caveat lending fit
The quickest way to place development finance is against a plain construction loan. A construction loan funds building works on a site you (or your customer) already own and control, and is usually assessed on serviceability like a mortgage. Development finance funds the whole project, often including the land, and is assessed on feasibility (GRV and TDC) rather than income, with a defined exit built in. The table below sets them side by side.
Three related facilities sit alongside these and each has its own page. A commercial property loan funds an income-producing or owner-occupied commercial property rather than a build, covered on our commercial property loans page. Where you need to secure a site quickly before the development facility is ready, a short-term option is a caveat loan, explained in our caveat loans page. And where funding comes from a specialist private funder rather than a bank, see construction finance and our private lending options.
The capital stack: senior debt, mezzanine, preferred equity and your equity
Bigger developments are funded in layers, called the capital stack. Senior debt sits at the bottom and is the cheapest and safest money, lent to a percentage of GRV or total cost. Above it, mezzanine finance or preferred equity fills the gap between what the senior lender will advance and the total project cost, at a higher price because it takes more risk.
Your own equity, which can include the value of land you already own, sits on top and is repaid last. A second mortgage can also sit behind senior debt where the numbers allow, and intercreditor arrangements set out who is paid in what order.
Who qualifies, and what gets a development declined
Lenders back developments that are ready and stall on ones that are not. A fundable development has its planning, its builder and its numbers lined up; a development gets declined when one of those legs is missing. The clean and messy lists below are what an assessor looks for first, and a development finance checklist is a good way to pressure-test a deal before you take it to a lender.
What makes a development fundable
- A development approval (DA) or a clear planning pathway
- A fixed-price building contract
- A credible, licensed builder with a track record
- Real equity, indicatively around a fifth to a third of total cost
- A workable feasibility margin
- A credible exit, sell-down or refinance
What gets a development declined
- No DA and no clear planning pathway
- No fixed-price contract, or an open-ended cost base
- A weak, unproven or unlicensed builder
- A thin feasibility margin
- Little or no genuine equity
- No clear exit, or unresolved ATO or credit problems
Who lends, and how to apply: banks, non-banks, private lenders and where a broker fits
Development finance comes from three broad places: major banks, non-bank specialist lenders, and private funders. Banks offer the cheapest money but apply the tightest tests, and often decline deals that are perfectly fundable, on presale requirements, location or the size of the raise. Non-bank and private lenders price higher but assess on feasibility and can move faster, which is where most specialist development lending sits. For context on the pipeline, in April 2026 Australia recorded about 16,710 dwelling approvals and about $7.75 billion in non-residential building approvals (ABS, seasonally adjusted and volatile month to month, a leading indicator rather than a finance cost), while business credit grew about 9.6 per cent over the year to April 2026 (RBA, a credit-growth rate, not an interest rate).
The application path is the same shape wherever you go: an indicative term sheet, then formal approval once a valuation and quantity surveyor report are in, then documents, then the first drawdown. When you are ready to package a deal, a broker compares the panel, structures the raise and presents the feasibility the way lenders want to see it. You can see how we do that on our development finance page, or check your eligibility first.
Property development finance is feasibility lending, not income lending. Get the three numbers right, GRV net of GST, total development cost and a credible exit, line up a DA, a fixed-price contract and a real builder, and the funding follows. Banks are cheapest but strictest; non-bank and private lenders assess on the project and can move faster.
Key takeaway: a lender is really underwriting your project's feasibility and exit, so build those first and the finance becomes a packaging exercise.Frequently Asked Questions
Property development finance is business-purpose funding for the full lifecycle of a property development, from site acquisition through construction to completion and exit. It is assessed on the project's feasibility, the end value, the total cost and the exit, rather than on your personal income. You can read a plain-English overview on our development finance page.
The lender approves a total facility against the project's feasibility, then releases it in stages: first toward the site, then progressively for construction as an independent quantity surveyor certifies each stage. Interest is usually capitalised rather than paid monthly, so the project carries itself until it is completed and sold or refinanced. See how development finance works for a step-by-step walk-through.
Gross realisation value (GRV) is the projected value of the finished development, assessed net of GST where the margin scheme applies. Total development cost (TDC) is the all-in cost to deliver it, including land, construction, fees, interest and contingency. Lenders size the facility against both, using loan to value and loan to cost limits, and lend to whichever is reached first.
It depends on the project, not your salary. Lenders set the facility as a percentage of gross realisation value (an LVR) and a percentage of total cost (an LTC), and lend to the lower of the two. Stronger feasibility, presales and equity lift the number; a thin margin or weak exit lowers it. All figures are indicative and vary by lender and project. A broker can check your eligibility before you commit.
Most lenders want real equity in the deal, and the value of land you already own can count toward it. As an indicative guide, developer equity commonly sits in the order of a fifth to a third of total development cost, though this varies with the lender, the project and the strength of the exit. Speak to a broker about how your site acquisition equity might count.
Not always. Many non-bank and private lenders will fund a development with no presales where the feasibility and exit are strong, although presales can increase leverage and reduce pricing. A qualifying presale is a genuine, arm's length, largely unconditional sale with a real deposit and a sensible sunset clause. See development finance with no presales.
An independent quantity surveyor reviews the build contract and budget, then certifies each stage of construction before the lender releases the matching drawdown. No certified progress means no drawdown, which keeps the facility aligned with the work actually completed. The surveyor also checks cost to complete so the remaining funds are enough to finish.
It is a package of costs, not a single rate: interest (usually capitalised rather than paid monthly), an establishment or line fee, quantity surveyor and valuation fees, legal costs, an ongoing monitoring fee and sometimes an exit fee. Because it is business-purpose lending, the consumer comparison rate does not apply. All amounts are indicative and depend on the lender and the deal. Learn how interest is capitalised.
Most development finance is business-purpose lending to a company or trust, which sits largely outside the National Consumer Credit Protection Act 2009, and commercial loans carry the lowest level of legal protection under Australian law (ASIC INFO 207). General protections against unconscionable conduct and unfair small-business contract terms still apply, and AFCA can consider some small-business complaints where the lender is a member. Much specialist development lending is funded through private lending. This is general information, not legal advice.
A construction loan funds building works on land that is already owned and controlled, and is usually assessed on serviceability like a mortgage. Development finance funds the whole project, often including the land, and is assessed on feasibility (GRV and total cost) with a defined exit, not on personal income. If you already hold the site and just need to build, a construction loan may be the simpler fit.
Mezzanine finance is a layer of funding that sits above the senior debt in the capital stack and fills the gap between what the senior lender will advance and the total project cost. It is priced higher than senior debt because it takes more risk and is repaid after the senior lender. It lets a developer complete a project without injecting as much of their own cash.
The two main exits are selling the completed stock (a sell-down) or refinancing to a longer-term facility and holding it. Residual stock finance is a loan against the unsold, completed units at the end of a project, giving you time to sell without the pressure of the development facility expiring. A clear exit strategy is one of the first things a lender assesses.
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Latest Insights
Updated 2 July 2026- The approval numbers: GRV and TDC in practiceHow lenders actually run the two ratios that size your facility
- Development finance equity tiers in FY27How much equity lenders want at each project size
- Multi-unit development finance: 5 lots vs 20 lotsHow the lender panel changes as unit count grows
- Drawdown and progress payment speedWhat determines how fast each stage claim is funded
- Cost overruns: the top-up pathsOptions when the build runs past the contingency
- Residual stock loans: equity for the next siteTurning unsold completed stock into acquisition capital
- Your first development as a business ownerWhat lenders want to see from first-time developers
- Development finance: broker vs going directWhere a broker changes the outcome and where they do not
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