Home / Property development finance / Residential development
Townhouses and subdivisions
From two townhouses on a back section to a 30-lot subdivision, the funding works the same way. It’s the feasibility that decides whether a lender says yes.
By Yatin Kainth, Financial Adviser FSP1007497. Last reviewed
Short answer
Residential development finance in NZ funds land and construction for townhouses, units and subdivisions, paid in stages as the build progresses. Lenders size the loan by loan-to-cost (often 65 to 80%) and loan-to-gross-realisation (often 60 to 70%), and want a profit margin of around 15 to 20% of costs. Pre-sales, a fixed-price build contract and experience improve terms.
Gross realisation
–
Profit margin on cost
–
Likely maximum loan
–
Your equity needed
–
Lender view
–
Sale costs are assumed at 3% of gross realisation. Finance costs are not included in the margin, so include them in your full feasibility. Indicative only.
Before you commit, run the numbers through the development finance pre-qualification tool.
Commonly 20 to 35% of total project cost, in cash or equity from other property.
Banks usually need pre-sales covering much of the debt. Many non-bank lenders will fund without pre-sales at a higher rate.
The total expected sale value of the completed dwellings, usually excluding GST.
Yes, but tell the lender upfront. It changes how that unit is valued and repaid.
A 20-minute chat costs nothing. I will tell you straight what lenders are likely to say.
Book a free chat →