Property Development Finance FAQ's

There is no single deposit requirement for every project.

In many cases, developers need around 20%–40% of the total development cost.

For example, if the total cost of the project is $4-million - you will need to contribute $800,000 - $1.6-million in equity. The amount you will require will depend on the deal itself. 

For example, lenders will usually look at things like:

• Your development experience

• The size and complexity of the project

• Whether the location is proven

• How realistic the build costs and end values are

• How clear the exit strategy is

• Whether there are pre-sales or not

• How profitable the project is

A first-time developer with no pre-sales will need to contribute more compared to a deal that has pre-sales with an experienced developer.

Yes, but it depends heavily on how fundable the project is.

Main banks will not fund new developers, but non-bank/ private lenders may still consider first-time developers where the overall proposal is strong.

That usually means:

• The build team is experienced

• The feasibility is realistic

• The product is likely to sell

• The location is good (main centers)

• There is enough profit margin

• There is enough contingency buffer if things change

For example, a first-time developer building a small townhouse project with an experienced builder and sensible numbers is a very different proposition from someone trying to deliver a larger multi-unit project with no proven support team.

Presales are not always required to get development finance, but it depends on the lender and the project.

Banks usually require presales. They want to see a portion of the project sold before committing funding.

Non-bank and private lenders are more flexible. In many cases, they will assess the overall deal and may not require presales, particularly if the project is straightforward and the numbers make sense.

That being said - having presales is very useful. They can:

• Improve the terms you’re offered

• Allow you to borrow more

• Make it easier to fund larger or more complex projects

• They also show you and the lender whether your project has demand

So while presales are not always required, they can strengthen the deal and give lenders more confidence.

How much you can borrow depends on the lender and the merit of the project.

As a general guide in New Zealand:

• Banks: approximately 70% of total project cost.

• Non-bank lenders: often around 65%–75% of end value (LVR)

But these are not fixed limits for Non-bank lenders.

They will adjust borrowing based on:

• The project’s profit margin (often 20%+ expected)

• How realistic the costs and end sales values are

• How much experience you have as a developer

• Whether you will have pre-sales or not

• How clear the exit strategy is

LTC (Loan-to-Cost) or LCR (Loan-to-Cost Ratio) is how much a lender is funding compared to the total cost of the project.

For example:

• If a development project costs $4,000,000

• And the lender provides $2,800,000 borrowing

• The LTC is 70%

In New Zealand, banks often target around 70% LTC, sometimes higher for stronger projects. Non-bank lenders may go higher depending on the deal.

LTC is one of the main ways lenders measure risk.

The higher the LTC, the more equity is required to support the project.

A good profit margin for a property development is typically around 20% or more on total project cost.

In practice:

• Banks often prefer closer to 25%

• Non-bank lenders may consider deals from around 20%, depending on the project

The margin acts as a buffer if things don’t go to plan.

For example, if build costs increase or sale prices soften, a stronger margin gives both you and the lender more room to absorb that.

Projects with lower margins can still be funded, but they are treated more cautiously and may require:

• More equity

• Lower borrowing

• Stronger supporting factors such as pre-sales or an experienced build team.

Non-bank development finance is funding provided by lenders outside of the major banks.

These lenders take a more commercial view of deals and are often used when a project does not fit standard bank criteria.

Non-bank finance is commonly used for:

• First-time developers

• Projects without presales

• More complex or time-sensitive deals

• Situations where bank funding has been declined

In return for that flexibility, non-bank lending usually comes with:

• Higher interest rates

• Additional fees

However, it can allow projects to proceed where bank funding is not available, especially when the deal itself is sound but does not meet strict bank policy.

Lenders are trying to answer one main question:
Does the deal make sense, and will the loan be repaid if things don’t go to plan?

In practice, they focus on a few key areas:

• Profit margin
  Typically around 20%+, with stronger deals closer to 25%. This gives a buffer if costs increase or sale prices soften.

• Leverage (LTC / LVR)
  How much is being borrowed relative to the cost and end value. Higher leverage increases risk, so it needs to be supported by a stronger deal.

• Accuracy of the numbers
  Build costs, civil costs, and contingency need to be realistic and well supported. Underestimated costs are a red flag.

• End value
  Based on comparable sales, not optimistic assumptions.

• Project and demand
  Standard, well-located developments are easier to fund than niche or higher-risk projects.

• Experience or team strength
  If you’re new, lenders will lean heavily on the builder and consultants.

• Exit strategy
  A clear plan to sell or refinance, and evidence that it’s achievable.

For example, a deal with a solid margin, realistic costs, and strong demand will usually be funded more easily than one that only works on best-case assumptions.

To apply for development finance, lenders need a clear view of the project, the site, and how it will be delivered.

At a minimum, this usually includes:

• A feasibility or project summary
  Showing total costs, expected end value and profit margin

• Details of the site and development
  Land value or purchase price, number of units and the overall plan

• Planning and consents
  Resource consent, building consent or the current stage of approvals

• Build costs
  A fixed-price contract if available, or well-supported estimates including civil works and contingency

• Development team
  Builder, project manager and key consultants involved

• Your financial position
  Assets, liabilities and how much equity is being contributed

• Exit strategy
  Whether the project will be sold, refinanced or held

In practice, lenders aren’t just reviewing documents. They are assessing whether the deal stacks up, including the margin, the level of risk and how far progressed the project is.

A well-prepared feasibility with realistic assumptions, along with clarity around the site and consents, will usually make the biggest difference to how smoothly the application progresses.