How To Finance Property Development
There are numerous avenues to financing property development projects and these are influenced to varying degrees by the level equity (developer’s contribution) and debt (borrowings). A wide range of lending institutions and non-bank lenders in Australia and overseas have different lending criteria. This is based on the developer’s experience, the development concept, property market drivers, anticipated viability, the professional team appointed, location of the project, size and category of mix of the proposed development.
The amount of equity required for a project varies widely, as does interest rates and charges, with the four major banks generally being more competitive, however with greater stringent requirements for debt. When borrowing, especially from a non-bank lender, due diligence on behalf of the borrower is important to ensure that the lending covenants are reasonable and the finance will be available as required.
Likewise, overseas funding is available and it is prudent to secure expert advice from an independent developer appointed advisor. Raising significant equity through associated investors, syndicates or perhaps crowd funding will reduce the lender’s risk and interest rates, and provide wider lender choice.