Property Development Finance in Australia

Property development finance is the engine behind most successful development projects in Australia. The right funding structure can mean the difference between a profitable build and a stalled one.

Yet for many developers, especially those starting out, the finance side is where projects run into trouble. Banks can be conservative, LVR requirements are strict, and the range of lenders and loan types is genuinely confusing.

This guide cuts through the noise. You’ll learn how property development finance works in Australia, what lenders actually want to see, how to structure your capital stack, and where a specialist broker can open doors that a standard bank application simply won’t.

Quick Answer

• Property development loans work differently from home loans as they use staged drawdowns, not lump-sum payments
• Lenders typically fund 65-80% of total development cost, depending on risk profile and loan type
• Pre-sales, feasibility studies, and DA approval are the three big boxes lenders want ticked
• Non-bank and private lenders can offer more flexibility than major banks, often with faster approvals
• A specialist broker gives you access to a broader lender panel and structures your application for the best outcome

What is Property Development Finance?

Property development finance is a purpose-built loan product used to fund the construction or development of residential or commercial property. This includes townhouses, apartment blocks, land subdivisions, or mixed-use projects. It’s not a standard home loan, and the distinction matters.

With a typical home loan, you receive funds upfront and make repayments from day one. Property development loans work differently. Funds are released in staged drawdowns tied to construction milestones: foundation completion, framing, lockup, fixing, and practical completion. Interest is often capitalised, meaning it’s added to the loan balance rather than paid monthly, which helps preserve cash flow during the build phase. Once the project is complete, you repay the debt using proceeds from sales or refinancing.

Loan terms are typically short, anywhere from 6 months to 3 years, because the finance is designed to fund the build, not hold the asset long-term.

Types of Property Development Finance in Australia

There’s no single loan product that fits every project. Here’s a breakdown of the main options available through Australia’s lender market.

Senior Debt (Bank Development Loans)

Senior debt is the primary source of funding for most development projects, typically provided by a major bank or non-bank lender. It sits at the top of the capital stack, which means it’s the first to be repaid. Banks offer commercial development loans for larger projects, but with strict lending criteria. They want strong pre-sales, DA approval, an experienced builder, and typically a proven developer track record.

Mezzanine Finance

When senior debt doesn’t cover the full funding gap, mezzanine finance steps in. It sits between the senior loan and your equity in the capital structure. Mezzanine lenders take on more risk than senior lenders, so rates are higher, but it allows developers to preserve equity and take on projects they couldn’t fund with senior debt alone. This path is particularly useful for developers who have a strong project but limited cash reserves.

Bridging Loans for Development

Bridging loans are a short-term option used to bridge the gap between purchasing a development site and either starting construction or securing longer-term finance. If you’ve secured a site and need to act quickly before your development loan is formalised, a bridging facility keeps the deal alive. Terms are typically 3 to 12 months.

Joint Venture Finance

Joint venture (JV) finance involves partnering with an investor or financier who contributes capital in exchange for a share of the project’s profits. It suits developers who have the skills and site secured but need someone to bring equity to the table. JV structures vary considerably. How profits are split, who controls decisions, and how the arrangement is documented all require careful legal and financial advice.

Residual Stock Loans

Once a project is completed, any unsold stock becomes a liability. A residual stock loan lets you refinance the development loan against that remaining inventory while you continue marketing and selling. It reduces the pressure of a hard settlement deadline and gives you time to achieve the right sale price rather than discounting to clear stock quickly.

Construction Loans

A construction loan is working capital for the build phase. Funds are released in staged payments as each milestone is reached, with interest calculated only on the amount drawn at any given time – not the full facility limit. For commercial finance projects, construction loans can cover residential developments, retail strips, industrial units, and more.

How Much Can You Borrow for a Property Development?

Lenders don’t just look at what the site is worth today; they’re more interested in what the completed project will be worth. This is called the Gross Realisation Value (GRV), also referred to as the end value or gross development value.

Most lenders will fund up to:

• 65-70% of the total development cost, as a general rule
• Up to 80% of the total development cost, in some cases, for experienced developers with strong pre-sales

Lenders also assess the Loan-to-Value Ratio (LVR): the loan amount expressed as a percentage of the GRV. A typical maximum LVR sits around 65-70% of GRV for a standard property development loan. Go above that threshold, and you’re either looking at mezzanine finance to fill the gap or a larger equity contribution from your own pocket.

Whether you’re applying for a residential or commercial development loan, pre-sales requirements are a significant part of this calculation. Major banks typically require a defined level of pre-sales (contractually exchanged sales, not just expressions of interest) before they’ll issue a formal approval. The required level varies by lender and project type, but covering 100% of the senior debt through pre-sales is a common benchmark for apartment projects. Non-bank and private lenders are often more flexible here, with some willing to fund with lower or no pre-sale requirements.

What Lenders Look for in a Development Loan Application

This is where many applications fall over. Here’s what lenders want to see:

• Developer experience and track record. First-time developers face higher scrutiny. Most lenders want to see at least one completed development, or a JV structure that brings in an experienced developer partner. Private lenders tend to be more open to first-timers than major banks.
• DA (Development Approval) status. Having a current, unconditional DA significantly strengthens your application. Applying without DA isn’t impossible, but you’ll pay more for the funding and have fewer lenders willing to consider it.
• Feasibility study and project costings. Your feasibility needs to show the project works commercially. Lenders typically look for a minimum return on cost of around 15-20%, with realistic assumptions on construction costs, sales prices, and contingencies. Sensitivity testing (what happens if costs run over or sales slow down) is looked upon favourably.
• Fixed-price builder’s contract. Lenders want cost certainty. A fixed-price contract with a licensed builder removes a major risk variable from their assessment and demonstrates your project is construction-ready.
• Equity contribution. The exact equity required depends on the lender and the project, but expect to contribute at least 20-35% of total development costs from your own equity or existing property holdings.

Property Development Finance Rates & Costs

Rates on a commercial development loan or residential development facility across Australia vary considerably by lender type, project risk, LVR, and loan size. Here’s a rough picture of the current market:

• Major banks: Generally lower rates for qualifying projects, but strict criteria and slower assessment timelines
• Non-bank lenders: Mid-range rates with more flexible criteria for qualifying projects
• Private/mezzanine lenders: Higher rates reflecting the additional risk, typically ranging from the low teens upward

Beyond the interest rate, factor in the following costs when testing feasibility:

• Establishment fee: Typically 1-2% of the loan amount
• Line fee: An ongoing fee charged on the undrawn portion of the facility
• Valuation fees: The lender will require an independent as-is and as-if-complete valuation
• Legal fees: Both lender legal costs and your own

A good feasibility model accounts for all of these. If your project only works with the cheapest possible financing, it probably needs another look before you go to market.

How to Finance Your First Property Development

If you’re new to development, starting smaller is the sensible play. A duplex, triplex, or small townhouse development keeps the complexity manageable and gives you a track record to build on.

The most accessible entry point for first-time developers is using equity in existing property as your equity contribution. If you own a home or investment property with sufficient equity, a lender may allow you to use that as security to reduce the cash required upfront.

What helps your first development loan application:

• A clear, well-documented feasibility check with conservative assumptions
• DA approval in place before applying
• A fixed-price contract with a reputable builder
• A smaller project that sits within mainstream lender appetite

Where many first-timers get stuck is trying to approach a major bank directly. Banks tend to be conservative with developers who lack a track record. A specialist development finance broker knows which lenders are most willing to work with first-time developers and how to structure your application to meet their criteria.

Why Use a Specialist Broker for Development Finance

Property development finance isn’t a product you can just apply for online and wait for a decision. It’s a structured, negotiated process – and who you have on your side matters.

A specialist development finance broker brings:

• Access to a broader lender panel. A broker who works in commercial finance daily has relationships with 50+ lenders across banks, non-banks, and private funders – more than you’d find by searching yourself. That means more options, more flexibility, and often a better structure.
• Experience with complex deals. Development finance isn’t easy. Structuring a deal that works across all variables (staged drawdowns, interest capitalisation, mezzanine stacking, pre-sale conditions) is something experienced brokers do regularly.
• Application preparation that holds up under scrutiny. Lenders decline more applications than they approve. A specialist broker knows what lenders are looking for, how to present your feasibility, and how to address likely concerns before they become deal-breakers.
• It costs you nothing. Brokers are paid by the lender, not by you. You get access to expert advice, a broader lender panel, and a structured application, at no direct cost to your project.

Ready to Structure Your Development Finance?

If you’re planning a development and want to understand your finance options before you commit to a site, the right time to speak with a specialist broker is before you sign anything. A good broker will map out what’s achievable based on your project, equity position, and experience level, then connect you with the lenders most likely to support it.

At Selectabroker, we match developers with specialist development finance brokers who know this market inside out. Get in touch for a free consultation and find out what your project can realistically achieve.

FAQs

Can I get development finance with no experience?

It’s harder but not impossible. Private and non-bank lenders are generally more open to first-time developers than major banks, particularly if you have a strong feasibility, DA in place, a fixed-price builder contract, and a credible equity position. Some lenders will also consider a JV structure that brings an experienced developer into the deal.

What’s the minimum deposit for a development loan?

There’s no universal figure, but most lenders expect you to contribute at least 20-35% of total development costs. This can come from cash, equity in existing property, or a combination. The exact amount depends on the lender, the project type, and your track record.

How long does development finance approval take?

It varies. Major banks can take 6-12 weeks or longer. Non-bank and private lenders can move faster, sometimes in 2-4 weeks for straightforward deals. Having a complete application with all documentation in order is the single biggest factor in reducing approval time.

Can I use equity in another property as my deposit?

Yes, in many cases. If you have sufficient equity in an existing property (an investment property or another development site), a lender may accept that as part or all of your equity contribution. A broker can assess whether your current equity position is workable for the project you have in mind.