Direct answer: A property development loan funds land, construction and project costs through staged drawdowns. Lenders assess the site, approvals, feasibility, borrower equity, developer and builder capability, presales or leasing, valuation, cost-to-complete and exit. The facility must remain fully funded through completion; headline leverage alone does not show whether a project is financeable.
This page owns the end-to-end development-loan structure. The commercial property development finance guide focuses on commercial asset types, while the construction finance guide goes deeper into drawdowns and building delivery.
Development finance by project stage
| Stage | Potential finance need | Evidence |
|---|---|---|
| Acquisition | Land purchase and settlement | Contract, planning status, contribution and preliminary feasibility |
| Pre-development | Design, approvals and professional work | Consultant scope, program, budget and funding source |
| Construction | Progressive building costs | Fixed or supported building contract, quantity-surveyor review and draw schedule |
| Completion | Defects, certification and final accounts | Completion evidence, contingency and remaining cost schedule |
| Exit | Sell-down or investment refinance | Presales, leasing, valuation, operating forecast and refinance plan |
A lender may finance only some stages. The developer must show how every required cost is funded.
The feasibility the lender can audit
The feasibility should reconcile:
- land and acquisition costs;
- design, approval and professional fees;
- construction contract and exclusions;
- statutory charges, contributions and utilities;
- finance interest and fees;
- marketing, sales and leasing costs;
- tax assumptions prepared with advisers;
- contingency and escalation;
- gross realisation or completed investment value; and
- timing of every cash inflow and outflow.
Changes to one assumption should flow through the full model. A project that works only at the optimistic sales case is not lender-ready.
What lenders assess
- Sponsor: experience, equity, conduct and capacity to fund overruns.
- Site: ownership, title, access, zoning, approvals and contamination.
- Product: design, buyer or tenant demand and alternate use.
- Builder: contract, experience, financial capacity and program.
- Costs: quantity-surveyor review, contingency and cost-to-complete.
- Revenue: presales, leases, valuation and market evidence.
- Structure: senior debt, mezzanine, equity and priority.
- Exit: settlement, sell-down or term refinance with fallback.
APRA’s specialised-lending guidance illustrates why acquisition, development and construction exposures are treated as a distinct credit category in bank frameworks.
Drawdown and cost-to-complete controls
Development loans are commonly drawn against verified progress rather than advanced in full. Before each draw, the lender or quantity surveyor may check completed work, invoices, remaining costs, variations, contingency and borrower equity.
The central question is whether undrawn loan funds plus committed borrower funds cover every remaining cost. If not, the project has a funding gap even if the original approval amount has not changed.
Capital stack comparison
| Layer | Role | Main risk |
|---|---|---|
| Senior development debt | Primary secured construction facility | Conditions, draw controls and completion obligations |
| Mezzanine or preferred capital | Fills a gap behind senior debt | Higher cost, priority and control complexity |
| Developer equity | Absorbs first loss and aligns sponsor | Additional equity may be required for overruns |
| Presale deposits or buyer funds | May support project economics subject to law | Access and use can be restricted |
Legal advice should confirm priority, guarantees, presale-deposit treatment and entity obligations.
A lender-ready development pack
- project and borrower structure chart;
- title, planning approvals and consultant reports;
- detailed feasibility and cash flow;
- building contract, program and builder profile;
- quantity-surveyor or cost report;
- valuation and market evidence;
- presale or leasing schedule;
- equity evidence and debt schedule;
- drawdown plan; and
- primary and fallback exits.
Illustrative project assessment — not a client outcome
A developer seeks finance for a small mixed-use project. The lender does not assess only the land value and build contract. It tests planning conditions, retail leasing assumptions, apartment sales evidence, builder capacity, contingency, interest through delay and the completed exit. If the retail space remains vacant, the fallback may require more equity or a different refinance structure.
This example is hypothetical and contains no leverage, rate or approval claim.
Main risks
- approval or utility delays;
- builder failure, variations and cost escalation;
- presale defaults or slow sales;
- valuation below feasibility assumptions;
- interest and holding costs during delay;
- insufficient contingency or sponsor liquidity; and
- completion without a workable residual-stock or term exit.
After completion, see residual stock loans.
Next step
Use the commercial property development service with the site, approvals, feasibility, build contract, valuation, equity and exit. General information only; not development, legal, tax or valuation advice.