What is pre-development finance?
Pre-development finance is a form of short-term lending that provides capital for property projects that have received development approval but have not yet commenced construction. It bridges the gap between land acquisition or DA approval and the start of construction, allowing developers to secure sites, complete pre-construction planning, and prepare for a construction finance facility.
What does pre-development finance cover?
Pre-development loans typically cover the acquisition of DA-approved development sites, holding costs during the pre-construction planning phase, professional fees including architect, engineer, and town planning costs, council contributions and infrastructure charges payable before construction, and costs associated with obtaining a construction finance facility.
How is pre-development finance assessed?
Lenders assess pre-development loans based on the current market value of the site (the “as is” value), the expected value upon completion of the proposed development (the “as if complete” value), the status and conditions of the development approval, the borrower’s track record and capacity, and the proposed exit strategy, typically refinancing into a construction facility or sale of the DA-approved site.
Granor Capital applies conservative loan-to-value ratios and obtains independent valuations on all security properties. Pre-development loans are assessed using the same documented credit criteria as all Granor Capital lending.
Why do developers use pre-development finance?
Pre-development finance allows developers to secure time-sensitive site acquisitions before construction finance is formally arranged, control development-ready sites while completing pre-construction planning, avoid losing sites to competing buyers during the bank approval process, and fund DA costs and professional fees without depleting equity reserves. Many developers use pre-development finance as a stepping stone to a larger construction facility once the project is ready to commence building.
Related: Property development finance | Construction loans Brisbane | How to apply
This article is for general information only and does not constitute financial advice.
