A good development opportunity can still stall without the right funding. The land may be suitable. Demand may also look strong. However, the project still needs enough money to move from settlement to completion. That is where property development finance becomes important. It can support the land purchase, planning, construction and other approved costs. More importantly, the facility must be structured around the project timeline rather than treated like a standard property loan.
Australia continues to record high levels of construction activity. In the March 2026 quarter, total construction work completed rose 3.4% to $83.4 billion. Building work reached $44.7 billion, including about $27.1 billion of residential work.
Even so, a busy market does not make every project financeable. Lenders still need to understand the costs, risks, developer equity and repayment plan.
What Is Property Development Finance?
Property development finance is short-term commercial funding used to acquire, build, improve or complete a property project. Common examples include townhouses, apartments, land subdivisions, warehouses, offices, retail sites and mixed-use developments.
Unlike a normal property purchase loan, the full construction amount is not usually released on day one. Instead, the lender approves a total facility and releases funds in stages as the project moves forward.
As a result, the loan follows the build. This approach also helps the lender monitor progress and confirm that enough money remains to complete the project.
What Can Commercial Construction Finance Cover?
The exact inclusions depend on the lender. However, commercial construction finance may cover several parts of the development budget, including:
- Site acquisition or refinance of existing land debt
- Planning, permit and consultant costs
- Demolition, excavation and early works
- Building, civil and infrastructure costs
- Approved interest and finance costs
- Marketing, selling costs and contingency
Nevertheless, lenders do not normally fund every dollar. The developer usually contributes cash, existing land equity or another acceptable source of equity first.
For this reason, the complete project feasibility matters more than the builder quote alone.
How Does Property Development Finance Work?
Land Purchase and Site Acquisition
Some developers already own the site. Others use business funding or a development facility to complete the purchase. Either way, the lender reviews the current land value, zoning, access, services and planning position.
Unapproved land carries more risk. Therefore, a lender may require additional equity or offer a smaller facility until the development approval is in place
Planning and Pre-Construction
Before construction starts, the lender will usually need a detailed feasibility, approved plans, permits, an acceptable builder and a suitable building contract.
Requirements vary by state and project type. Like in Victoria, domestic building work involving more than one trade and valued above $10,000 generally requires a major domestic building contract.
Commercial projects have different rules. Therefore, legal, planning and accounting advice should be obtained for the specific site and structure.
Construction Drawdowns
Once the facility is approved, funds are normally released through progress drawdowns.
A quantity surveyor or valuer may inspect the site before each payment.
The report may confirm the work completed, costs paid, approved variations and the amount still required to finish the build. This is often called a cost-to-complete assessment.
If the project runs over budget, the developer may need to add more equity before the next drawdown. Consequently, a realistic contingency is essential from the start.
Completion and Exit
Development finance is generally short term. Therefore, lenders want to know how the debt will be cleared when the project is complete.
The exit may come from selling completed properties, refinancing retained stock, selling the whole development or moving into commercial property refinance.
For a build-to-hold project, the lender may also assess expected rent, leasing risk and the completed asset’s ability to service long-term debt.
How Much Can You Borrow Through Property Development Finance?
There is no fixed loan amount for every project. Instead, lenders compare the proposed debt with both the total project cost and the estimated completed value.
Loan-to-Cost
Loan-to-cost compares the facility with the full development cost. This cost may include land, stamp duty, construction, consultants, council charges, marketing, finance expenses and contingency.
Lender limits vary. Therefore, developers should not assume that a particular percentage will apply before the lender has reviewed the project and valuation.
Loan-to-GRV
Gross realisation value, or GRV, is the estimated total sale value of the completed project. For example, eight townhouses expected to sell for $750,000 each would have an estimated GRV of $6 million.
An independent valuer usually supports the figure. If the valuation is lower than the feasibility assumes, the available loan may also fall. As a result, the developer may need more equity.
What Do Property Development Lenders Assess?
Property development lenders review the transaction as a complete commercial project. They commonly consider:
- Developer, builder and project-manager experience
- Planning and permit status
- Independent land and completed-value assessments
- Detailed feasibility and construction contract
- Quantity-surveyor reporting and contingency
- Developer equity and evidence of its source
- Presales, market demand and selling prices
- Existing debt, credit history and tax obligations
- Expected margin and exit strategy
A well-presented application can make the assessment easier. However, presentation cannot fix an unrealistic feasibility. The numbers still need to work.
In addition, unresolved ATO debt or other liabilities should be explained early. These issues do not always prevent approval, but they may affect lender choice, pricing and conditions.
Are Presales Required for Commercial Construction Finance?
Presales are contracts signed with buyers before construction is complete. They show demand and can reduce the lender’s exposure at completion.
Banks may require a set level of qualifying presales before the first construction drawdown. They may also review contract clauses, buyer deposits and purchaser concentration.
However, presales are not always mandatory. Some non-bank commercial lenders Melbourne may consider fewer presales or, in selected cases, no presales. In return, they may require more equity, lower leverage or higher pricing.
Commonwealth Bank has confirmed that accepted presale contracts can form part of the funding structure for residential developments
What Costs Should a Development Feasibility Include?
One of the most common problems is an incomplete budget. A proper feasibility should allow for:
- Land, stamp duty and settlement costs
- Construction, demolition and civil works
- Architects, engineers and statutory charges
- Valuation, legal and quantity-surveyor fees
- Interest, lender fees and holding costs
- Marketing, commissions, GST and tax advice
- Contingency and possible cost overruns
Those figures will not apply equally to every project. Even so, they show why a thin contingency can create problems. Delays, variations and slower settlements can quickly change the final result.
Documents to Prepare for Property Development Finance
Preparing the right documents early can reduce delays. Lenders commonly ask for the contract of sale, ownership structure, development approval, building permits, final plans, detailed feasibility, valuation, builder information and evidence of equity.
They may also request company financials, tax returns, bank statements, presale schedules and a clear exit strategy. In addition, any changes to the building contract should be documented before submission.
Because every lender has a different checklist, a commercial finance broker Melbourne can help confirm what is needed before the application is lodged. This can save time and reduce repeated questions during credit assessment.
Bank Versus Non-Bank Property Development Finance
Banks may offer competitive pricing for experienced developers with strong equity, suitable presales and complete documentation.
However, bank policy may be less flexible where the project involves incomplete approvals, unusual property types, a first-time developer, higher leverage or a short settlement deadline.
By comparison, private and non-bank lenders may take a broader view. They can sometimes work with complex structures or lower presales. However, interest and fees may be higher.
Therefore, the lowest rate is not always the best facility. Drawdown conditions, valuation assumptions, approval certainty and timing also matter.
How a Finance Broker Can Help
A commercial finance broker Melbourne can review the project before it is presented to lenders. This early review may identify missing documents, unrealistic assumptions or a likely equity gap.
Depending on the project, a commercial loan broker may help compare commercial construction finance, commercial land development loans, industrial property finance and commercial property loans Melbourne.
A business finance broker can also coordinate with the accountant, solicitor, builder, valuer and quantity surveyor. As a result, the lender receives one consistent version of the project.
For more complex transactions, access to non-bank commercial lenders Melbourne may also create options when a major bank’s policy does not fit. Still, the facility must remain affordable and suitable for the exit plan.
So, a property development finance is not simply a loan secured by land. The lender needs to understand the approvals, total costs, developer experience, completed value and repayment strategy.
At the same time, the structure should leave enough money to finish the project if costs rise or sales take longer than planned.
At Xpress Finance, we help developers explore finance solutions for SMEs, commercial property finance Melbourne, industrial property loans Victoria and other secured business loans linked to property projects.
With access to more than 50 lenders, our team can review the feasibility, identify possible funding gaps and explain which business funding structures may be available.
Speak with the Xpress Finance team before committing to your next development.