Sector guide · 8 min read
How to finance a real estate development project
Development lending is short-dated, drawn in stages and repaid from an exit — a sale or a refinance. Underwriting therefore concentrates on the exit, not the build.
September 1, 2026
Key takeaways
- Debt is set by loan-to-cost during build and loan-to-value at exit, whichever binds first.
- The exit route must be evidenced, not asserted.
- Interest is usually rolled up and settled from the exit proceeds.
- Contractor strength and a fixed-price contract shape the whole risk assessment.
The appraisal is the deal
A development appraisal sets out land cost, construction cost, professional fees, finance costs, contingency and the gross development value on completion. The residual — value less all costs — is the profit, and lenders test how much of it can evaporate before the debt is at risk.
A scheme showing thin profit on optimistic sales values is the most common decline reason we see. Underwriters sensitise sales prices downwards and costs upwards, and look for the scheme to survive both.
Loan-to-cost and loan-to-value
During construction, the facility is normally expressed as a percentage of total project cost, with the sponsor's equity going in first or alongside. At exit, the same debt is measured against completed value. Both constraints apply; the tighter one governs the amount available.
Because interest is typically rolled up rather than serviced monthly, the facility must be sized to include the finance cost itself, together with a realistic contingency.
Evidencing the exit
Two exits dominate: sell the units, or refinance onto long-term investment debt and hold. Each needs evidence.
- Sales exit — comparable evidence, agent's marketing appraisal, reservations or pre-sales.
- Refinance exit — signed or heads-of-terms leases, tenant covenant strength, an indicative term-sheet from the incoming lender.
- In both cases, a realistic sales or letting period after practical completion.
Build risk sits with the contractor
A fixed-price contract with a competent main contractor, collateral warranties in the lender's favour, and a monitoring surveyor certifying each drawdown together convert an open-ended construction risk into a manageable one. Self-build or trade-package procurement by an inexperienced developer is priced accordingly.
Documents to have ready
A development file moves fastest when these arrive together.
- Planning consent and approved drawings.
- Costed budget and cash-flow programme.
- Building contract or tender with contractor details.
- Land title and any overage or option agreements.
- Valuation or agent's appraisal supporting the gross development value.
- Developer's track record on comparable completed schemes.
Discuss your project with the lending desk
Facilities from $250,000 to $50,000,000, with terms to 240 months. Underwriting responds within 24–48 hours of a complete submission.