Development Finance in FY27: What Each Equity Tier Unlocks
Development Finance FY27: Equity Tiers | Switchboard Finance
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Development Finance · Equity Tiers · FY27
Development Finance in FY27: What Each Equity Tier Unlocks
Non-bank development lenders read your day-one equity before anything else. Here is what each equity tier unlocks heading into FY27, from feasibility headroom to a presale-light structure.
Quick Answer
Non-bank development finance is sized on your day-one equity, not just the land value. The more equity you bring against total development cost, the more your development finance structure can flex on presales and drawdown. Your equity tier sets what a lender will fund.
How much equity do non-bank development lenders require?
Non-bank development lenders read your day-one equity against total development cost before anything else, and the answer is that it depends on the tier you sit in rather than a single headline number. A lender is funding a project that does not exist yet, so the equity you contribute on day one is the buffer that protects the deal if costs move or sales slow. That buffer, not the postcode, is the first thing a lender weighs.
Where this commonly lands is a lender day-one LVR, illustrative read against total development cost rather than the end value, with the contribution rising as presale cover falls. The loan-to-value ratio a lender quotes early is indicative and varies by lender until they have read your feasibility, your development approval and your exit. For an industry view on feasibility discipline, the Urban Development Institute of Australia is a useful reference point.
The three equity tiers, and what each one unlocks
The simplest way to plan a raise is to think in three equity tiers, because each tier unlocks a different structure heading into FY27. A thinner tier still gets funded, but the conditions tighten; a stronger tier buys flexibility on presales and drawdown.
Each tier is read against total development cost, indicative and varies by lender, and what changes from one tier to the next is how hard a lender leans on presales and how much room the build budget has to move.
Tier one
Thin equity
The minimum a lender will accept. The deal can still proceed, but it usually wants stronger presale cover and a tighter progress claim regime, and your feasibility headroom is slim. A small cost overrun is enough to erase the buffer.
Tier two
Moderate equity
The structure starts to breathe. A lender will look at fewer qualifying presales and a smoother drawdown, and the conditions ease as the buffer against cost movement grows.
Tier three
Strong equity
A presale-light structure becomes realistic and the day-one LVR read is at its most comfortable. The headroom carries a reasonable cost increase without breaking the feasibility, which is what buys the flexibility.
Why day-one equity decides your structure
Day-one equity decides your structure because it sets the cost to complete a lender has to fund and the margin it can rely on if the market moves. The wider the gap between cost to complete and gross realisation value, the more feasibility headroom there is, and headroom is what lets a lender soften on presales. Demand for new stock is part of that read, and approvals data heading into FY27 has been steady rather than soft.
10,088 houses
Private-sector houses approved in April 2026, the third straight month above 10,000, a sign that the pipeline feeding development demand has held firm into FY27.
Source: ABS Building Approvals, Australia, April 2026. As of April 2026. Indicative context only.The projects that price well are the ones where the developer can show that headroom survives a reasonable cost increase, not just the base case. That is the difference between an equity tier that reads as strong and one that reads as optimistic.
What lenders look at beyond the headline LVR
Beyond the headline LVR, a development lender reads your feasibility, your sales evidence and your exit, because the LVR alone does not tell it whether the project finishes. Total development cost and gross realisation value frame the size of the facility, then the build program and progress claim schedule frame how it is drawn. A clean feasibility with disciplined cost to complete is worth more than a slightly higher equity contribution attached to a loose budget.
If you are weighing a presale-light path, our note on development finance with limited presales works through the trade, and the way an underwriter reads a build is covered in how a lender reads a unit build at progress-claim stage. Once a project completes and stabilises, many developers refinance the residual into a commercial property loan. You can see the full picture across the Property Lending Hub.
Development finance in FY27 is read tier by tier: your day-one equity against total development cost sets the feasibility headroom, and headroom is what unlocks a presale-light structure and a more comfortable day-one LVR. A thin tier still funds, but on tighter terms; a strong tier buys flexibility. The number a lender quotes is indicative and varies by lender until they have read your feasibility and exit.
Key takeaway: Size your equity to the headroom you want, not the minimum a lender will accept, and the structure follows.Frequently Asked Questions
How much equity a non-bank development lender requires depends on your day-one equity position against total development cost, and it varies by lender and project. As a guide, a stronger equity tier opens a presale-light structure and a higher lender day-one LVR, while a thinner position narrows your feasibility headroom and tightens conditions. The number a lender quotes is indicative until they have read your feasibility and exit.
Gross realisation value is the total expected sales value of your completed development, net of selling costs, and it matters because a lender sizes the facility against it as well as against total development cost. A healthy margin between cost to complete and gross realisation value is the feasibility headroom a lender looks for. Sales evidence and a realistic valuation make that margin credible rather than optimistic.
You can get development finance with limited presales through a presale-light structure, but it typically asks for a stronger equity tier to offset the reduced sales cover. Specialist and non-bank funders are more comfortable here than major banks, and the trade is usually more day-one equity in exchange for fewer qualifying presales. The exact mix is indicative and varies by lender, as we work through in our note on development finance with limited presales.
The difference between development finance and a commercial property loan is the stage of the asset: development finance funds construction and is drawn against progress, while a commercial property loan funds a completed, income-producing building. Development finance is sized on total development cost and gross realisation value, where a commercial property loan is read against the lease and valuation. Many developers move from one to the other as a project completes.
Cost to complete affects a development loan because it sets the funding a lender must advance against your remaining works, and it is checked against your feasibility headroom at every progress claim. If cost to complete drifts up without matching value, the margin a lender relies on shrinks and conditions tighten. Keeping the build budget disciplined protects the structure you started with.
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