Legal Insights

The Developer Handbook - Accessing finance for your development project

By Ian Beattie

• 22 July 2019 • 3 min read
  • Share

In 2018 and 2019, as parts of the real estate market have softened, the appetite and ability of the Big 4 banks to fund property development has reduced when compared to their former capacity due to the tightening of regulatory requirements and the fall out from the Financial Services Royal Commission. In essence, funding projects, whether residential, industrial, office or retail, has become harder.

The rise of the non-bank sector (being non-deposit taking institutions) has partially filled the void created by the retreat of the Big 4 banks, but to access credit with any group the fundamentals of a project’s feasibility will be scrutinised more than ever.

What, then, are the key fundamentals and milestones that a financier will look for in the current climate? Here are some of the key milestones and issues that we have seen as important to project financiers to help prepare your pitch for project funding:

Project feasibility

An accurate and considered project feasibility model, with an independent assessment to quantify and verify that the development costings are reflective of the market conditions, is critical. Financiers will scrutinise and assess project feasibility carefully.

Your track record

Have you previously delivered successful projects on time and on budget without delays and cost overruns? Provide summaries of these success stories. This is more important than ever in the current climate.

The project team

Who are the consultants engaged (for example the architect, builder and project manager) and what is their experience in working on similar projects? Financiers will require comfort that the consultants on a project have appropriate experience.


Has a planning permit been obtained? Most financiers will require a planning permit. If so, is there sufficient time before expiry to commence and complete the project?

Construction program

Make sure that the proposed construction program is realistic and contains sufficient contingency for any delays.

Evidence of income – residential pre-sales

You’ll need to provide confirmation of the level of existing pre‑sale contracts, which at present with the Big 4 banks is usually an amount of at least 100% of debt cover, net of GST and outstanding sales commissions. This means that upwards of a further 15% above the facility limit will need to be held in qualifying pre‑sales to achieve the 100% net threshold.

Non-bank lenders may be more flexible with pre-sales coverage, and accept less pre-sales, although that will translate into higher interest rates and costs to reflect the increased risk.

Evidence of income – leasing

In office and industrial leasing a financier will scrutinise the key commercial terms of any pre-leases which will deliver rental income upon completion of the project. Spend time and effort on preparing quality leasing documents that will stand up to that scrutiny.


The financier will require comfort that a reputable builder is/will be engaged, and that the builder has given an indicative construction price within the project feasibility which has been verified by a quantity surveyor.


A robust and current valuation report to confirm both the land value, ‘as is’, and the ‘as complete’ end valuation will be required, so that a financier can verify that the project costs are within acceptable market tolerances.


A financier will scrutinise in detail all incentives offered to purchasers and tenants, such as rebates, rent free periods, fit-out works and rental guarantees to assess what impact they have on project feasibility. Be mindful of this when agreeing incentives to secure purchasers or tenants.

We dive deeper into project funding issues in the Developer’s Handbook, including looking at APRA liquidity requirements and how that affects banks and non-banks, as well as the cornerstone of many residential project finance requirements – pre-sales and the ever moving target of what constitutes a qualifying pre-sale.

The Developer Handbook will be released later this year. In the meantime, stay tuned for our next extract where we look at key issues when negotiating Facility Agreements with financiers.

Looking for more information on accessing finance for your development project?

Visit The Developer Handbook page

By Ian Beattie

  • Share

Recent articles

Online Access