This guide covers everything a property developer needs to know about construction finance in Australia — how it works, what lenders look for, how to get approved faster, and the alternatives when banks say no.

What is Construction Finance?

Construction finance is a specialist form of debt used to fund the building phase of a property development project. It differs from a standard residential mortgage in several key ways:

  • It is drawn progressively as construction milestones are reached and certified by an independent quantity surveyor (QS)
  • Interest is typically capitalised during the construction period — added to the loan balance rather than paid monthly
  • The loan is assessed on the end value (Gross Realisation Value / GRV) of the completed project, not just the land value
  • It is a short-term facility — typically 12 to 24 months, repaid on project completion and sale
  • The lender takes a first registered mortgage over the development site as security

How Much Can You Borrow? Understanding LVR in Construction Finance

The most important number in any construction finance application is the Loan to Value Ratio (LVR) — expressed as a percentage of the project's Gross Realisation Value (GRV). GRV is the total sale value of the completed project if every dwelling sells at its estimated market value.

In the current market:

  • Major banks typically lend to 65% of GRV for residential development
  • Non-bank lenders commonly go to 70% of GRV
  • Specialist private lenders will occasionally go to 75% of GRV for low-risk projects with experienced developers

This means a developer building a $20 million GRV project could access between $13 million and $15 million in senior construction debt. The balance — plus your equity — must cover all project costs. When the numbers don't work at senior debt LVR, mezzanine finance can bridge the gap.

What Do Construction Lenders Look For?

Every construction finance application is assessed across four dimensions. Understanding these allows developers to prepare stronger applications and pre-empt lender questions:

1. Project Viability

Does the project stack up? Lenders want to see a positive feasibility with a minimum development margin of 20–25% of total project costs. They also assess the project's location, comparable sales, demand drivers, and absorption rate — how quickly can the units sell at their estimated prices?

2. Presales

Pre-sales contracts demonstrate market demand and provide the lender with evidence that the debt will be repaid on completion. Bank presale requirements in 2026 typically range from 80–100% of debt coverage. Non-bank lenders apply more flexible presale requirements, with some accepting zero presales for well-located projects with experienced developers.

3. Developer Track Record

Lenders want to see that you have successfully completed similar projects. Your development CV — a summary of previous completions with project type, size, LVR, and outcomes — is a critical document in any finance application. First-time developers can still access construction finance, but typically need to demonstrate stronger project metrics and/or bring a development manager with a track record to the team.

4. Builder Quality

Most lenders require a fixed-price building contract with a licensed builder who has demonstrated capacity to complete the project. Builder financial capacity, insurance, and track record are all assessed. Lenders will often require a QS to review the building contract and confirm that the contract sum is reasonable for the scope.

The Non-Bank Revolution — Why Banks Are No Longer the Only Option

The most significant shift in Australian construction finance over the past five years has been the expansion of the non-bank lending market. Private credit funds, offshore capital, family offices, and specialist mortgage funds have stepped into the space created by tighter bank credit policies.

Non-bank construction lenders offer:

  • Higher LVR limits — up to 70–75% of GRV vs. 65% from banks
  • Lower presale requirements — from 50% coverage down to nil for appropriate projects
  • Faster approvals — credit decisions in 5–15 business days vs. 4–8 weeks for banks
  • More flexibility on deal structure — residual stock, land-only facilities, DA finance
  • Willingness to look at deal complexity — mixed tenure, NDIS, commercial components

The trade-off is a higher interest rate — typically 2–5% above major bank construction rates. However, when a bank's slower approval process threatens your construction start date, or their LVR limit kills your feasibility, a non-bank solution at a higher rate is frequently the right commercial decision.

How to Get Construction Finance Approved Faster

The speed at which construction finance is approved is heavily influenced by the quality of the initial information package submitted to the lender. A complete, well-prepared application eliminates the back-and-forth of conditions requests and can cut weeks off the approval timeline.

Evcorp's standard information memorandum for construction finance includes:

  • Project overview and location summary with suburb analysis
  • Development feasibility (including Evcorp's independent review)
  • Developer CV with completed project history
  • Executed or draft building contract with fixed price and programme
  • Independent QS report or cost plan
  • Comparable sales analysis supporting GRV estimates
  • Legal structure of the borrowing entity
  • Security description including title search and encumbrances
  • Pre-sales schedule with contract values, deposit structure, and sunset dates

Frequently Asked Questions

How do I get construction finance approved faster in Australia?

To get construction finance approved faster: (1) engage a broker before the DA is approved — early engagement allows pre-positioning with lenders; (2) have a fully costed feasibility with a 10-15% contingency prepared by an independent Quantity Surveyor; (3) present a clear sponsor track record with evidence of completed projects; (4) have presales at or above the lender's debt cover threshold; (5) ensure the builder's contract is a fixed-price lump sum with a reputable builder. Evcorp delivers indicative terms within 48 hours of receiving a complete mandate.

What do construction lenders look for in Australia?

Australian construction lenders assess: (1) Feasibility — is the project economically viable with realistic cost and revenue assumptions? (2) Sponsor — does the developer have a proven track record of completing similar projects on time and budget? (3) Presales — do presales meet the lender's debt cover threshold? (4) Location — is the project in a market with demonstrated demand? (5) Builder — is the builder qualified, well-capitalised, and using a fixed-price contract? Evcorp structures applications to address all five criteria before submission.

Can I get a construction loan with no presales in Australia?

Presales are a standard requirement for residential construction finance in Australia, but lenders vary in their thresholds. Major banks typically require 100% debt cover through presales. Some non-bank lenders accept 80% or less for well-located projects with strong sponsors. High-equity transactions (40%+ sponsor equity) may also attract reduced presale requirements. Evcorp identifies lenders with the most favourable presale criteria for each project and advises on presale strategy during the mandate phase.

Construction finance is not a commodity product — the right facility for your project depends on your project's metrics, your track record, and which lenders are actively writing loans in today's market. Evcorp knows who is moving and what terms are available right now.

If you are planning a construction project and want to understand your financing options, contact Evcorp to arrange a confidential initial discussion.

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