When Your Construction Facility Expires and Units Have Not Sold
Development Finance for Unsold Stock | Switchboard Finance
Construction Hub
Development Finance · Facility Expiry · Residual Stock
When Your Construction Facility Expires and Units Have Not Sold
After practical completion a construction facility typically has only a short runway before it matures. When the last units have not sold by that date, you do not have to discount to clear. Refinancing the completed stock onto a residual stock loan repays the senior debt and keeps a measured sell-down window open.
Quick Answer
When your construction facility expires and units have not sold, the usual move is to refinance the completed stock onto a residual stock loan rather than discount to clear, which buys a measured sell-down window. Speak to a broker about your development finance exit before the facility matures.
What Happens When Units Have Not Sold by Completion
On the files that cross my desk, the developers who get caught out are the ones who treat practical completion as the finish line. It is not. When the units have not sold by completion, your construction facility does not quietly roll over. It reaches its expiry date and the lender expects to be repaid. After practical completion a construction facility usually leaves only around 60 to 120 days of facility runway, indicative and varies by lender, before it matures, so the pressure builds quickly on any stock still on the market.
The build is done, but the senior development finance facility was only ever priced and structured to carry the project through construction, not to sit against completed stock indefinitely. That is the mismatch that forces a decision. If you want the underlying mechanics first, our explainer on how development finance works walks through the build-stage drawdowns and the exit, and the loan to cost ratio headroom you used during the build does not change the fact that the lender now wants its money back.
The Timeline From Practical Completion to Facility Expiry
The sequence from practical completion to facility expiry is short and predictable, which is exactly why it pays to plan the exit early. Practical completion triggers the occupation certificate and the start of settlements, but it also starts the clock on the facility. Where the runway runs out before the last units settle, you have two broad paths: sell down in time on your own terms, or be forced into a discount to hit the expiry date. The difference between the two is almost always how early the refinance was lined up.
Cleared in Time
- Refinance lined up before the facility matures
- Senior debt repaid on schedule, no default event
- Remaining units sold at full market value
- Equity in the project preserved
Ran Past the Runway
- Facility matures with stock still unsold
- Lender pressure forces a quick clearance
- Units discounted to settle before the deadline
- Margin and equity eroded at the finish line
The card on the left is what a planned site acquisition to exit looks like end to end. The card on the right is what happens when the runway is treated as an afterthought. The single most common reason a project lands in the right-hand column is that nobody started the refinance conversation until the maturity letter arrived, by which point the lender holds the timing.
Moving Onto a Residual Stock Loan
Moving onto a residual stock loan is the standard way to repay the construction facility without dumping stock. A residual stock loan refinances the completed, unsold units so the senior facility clears and you reset a fresh sell-down window. Terms on these typically run 6 to 24 months, varies by lender, which is usually enough to sell remaining units into normal market conditions rather than against a deadline.
Pricing rests on the value of the stock. The loan is typically capped around 65 to 70 percent of as-is end value net of GST, illustrative, and as each unit settles a partial-release price set above the allocated debt, indicatively around 105 to 120 percent, releases the title so the buyer can complete. That partial-release mechanism is what keeps the lender comfortable as the security pool shrinks, and it is worth modelling unit by unit before you sign, because the release prices set how much cash each settlement actually frees up. Where the residual loan needs to stretch a little further up the structure, mezzanine finance can sit behind the senior debt, and the relationship between drawn debt and value is read through standard loan to value ratio measures.
Holding the Sell-Down Window Without Discounting
Holding the sell-down window without discounting is the whole point of refinancing rather than clearing. A residual stock loan, or a shorter property-secured facility such as a caveat loan used as a short-runway pressure valve, lets you repay the senior debt on time and keep selling at full value. Specialist and non-bank funders are usually the ones writing this, since major banks have largely stepped back from holding completed speculative stock.
The valuation is what sets the ceiling, so it pays to have a current figure before the facility matures. The Australian Property Institute sets the professional standards the valuers work to, and a credible as-is end value is what a funder lends against. If the held stock is income producing or you plan to hold rather than sell, a commercial property loan or a longer-term private lending facility can take over from the residual loan once the project has settled into a steadier shape. The practical sequence is rarely a single product: a residual stock loan clears the build facility, the bulk of the stock sells inside that window, and a small held remainder rolls into a longer facility. For the full picture across the lane, the construction hub and the construction loan pack map out the options stage by stage.
When a construction facility expires with units still unsold, the strong move is to refinance the completed stock rather than discount to clear. A residual stock loan repays the senior debt on time, resets a sell-down window measured in months, and protects the equity you built into the project. The valuation sets the ceiling, and lining the refinance up early is what keeps the exit on your terms.
Key takeaway: Line up the residual stock loan before the facility matures, so a short runway never forces a discount.Frequently Asked Questions
When the units have not sold by completion, your construction facility reaches its expiry date and the outstanding balance falls due rather than rolling over automatically. The common path is to refinance the completed stock onto a residual stock loan so the senior facility is repaid and you keep a sell-down window. You can read how the underlying product works in our guide to how development finance works.
The time you have to sell after practical completion is usually short, because a construction facility typically leaves only around 60 to 120 days of runway, indicative and varies by lender, before it matures. Most developers refinance onto a development finance exit or a residual stock loan well before that date rather than racing the clock.
A residual stock loan is finance that refinances completed, unsold development stock so you can repay the construction facility and sell the remaining units in your own time. Terms typically run 6 to 24 months, varies by lender, and pricing rests on the as-is end value of the stock. It often sits alongside other property-secured options such as caveat loans when timing is tight.
How much you can borrow against unsold development stock is usually framed against the as-is end value, with the loan typically capped around 65 to 70 percent of as-is end value net of GST, illustrative and varies by lender. The figures rest on a current valuation, and the Australian Property Institute sets the professional standards valuers work to. See also our note on loan to value ratio.
You can usually avoid discounting unsold units to repay the construction loan by refinancing the stock rather than forcing a fire sale before expiry. A residual stock loan or a property-secured facility clears the senior debt and resets a sell-down window without forced discounting. For a lender-side view of how this is assessed, see our piece on the private funder residual stock rollover.
FBAA Accredited
