Development Finance in Australia: The Capital Stack Explained for 2026

This guide sets out every layer of the Australian development finance capital stack as it operates in 2026 — what each layer costs, who provides it, and how to decide which combination suits your project.

The Development Finance Capital Stack

A development capital stack is built from the bottom up: senior debt first, then any additional leverage layered on top, with sponsor equity absorbing the residual risk. Each layer has a different risk position, and is priced accordingly.

Senior Construction Debt

The base of almost every stack. A first-mortgage facility funding construction costs, drawn progressively against milestones certified by an independent Quantity Surveyor. Typical terms in the current market: 65–70% LVR on a loan-to-cost basis, 18–24 month tenor, and 80–100% presale cover depending on lender type. Evcorp arranges senior construction debt from $5M to $100M+.

Stretch Senior

Where a project needs more leverage than a standard senior facility offers, stretch senior extends the LVR band to roughly 75–80% while remaining a single-lender, first-mortgage structure. It is provided almost exclusively by non-bank lenders and private credit funds, and avoids the added complexity of a second-ranking instrument.

Mezzanine Finance

A second-ranking facility secured behind the senior lender, mezzanine finance lifts total leverage to as much as 85–90% of total development cost. Pricing typically runs 14–22% per annum, with interest almost always capitalised rather than paid current. Because it sits behind the senior lender, the senior facility must consent via an inter-creditor deed.

Preferred Equity

Structured as an equity instrument rather than a loan, preferred equity sits above mezzanine in most stacks and can push combined leverage to 90–92% of total development cost. Because it is not secured debt, it sidesteps the inter-creditor process entirely — useful when a senior lender's terms prohibit a second mortgage.

DA Finance and Land Bank Facilities

Before construction starts, developers often need to fund holding costs — rates, land tax, consultant fees — while approvals progress or presales are secured. DA finance and land bank facilities serve this pre-construction phase, typically at lower LVRs than construction debt and priced to reflect the absence of a completed asset as security.

Residual Stock Facilities

At practical completion, unsold units can be refinanced out of the construction facility and into a residual stock loan. This removes the pressure to sell at a discount to meet a construction loan's maturity, buying time to achieve target pricing on the remaining stock.

How Much Equity Do You Need?

Most senior lenders expect the developer to fund 20–35% of total development cost as equity. Adding mezzanine finance or preferred equity reduces the cash equity required — but every additional layer raises the blended cost of capital, so the decision is a trade-off between preserving equity and protecting project returns.

The right answer depends on the sponsor's objectives: a developer running a single project may prioritise minimising cost of capital, while a developer running several projects concurrently may prioritise stretching each dollar of equity across more sites. Evcorp models both outcomes before recommending a structure.

Development Finance vs Construction Finance — What's the Difference?

The two terms are often used interchangeably, but they aren't the same thing. Construction finance refers specifically to the facility that funds the physical building phase — the senior (or stretch senior) debt drawn against certified milestones. Development finance is the broader term for the entire capital structure across the project's life: DA finance before construction, the construction facility itself, any mezzanine or preferred equity layered on top, and the residual stock facility that follows completion.

See Evcorp's dedicated Construction Finance Australia Guide for a deeper look at the construction-phase facility specifically.

What Lenders Assess Across the Stack

Whichever combination of layers a project uses, lenders across the whole stack are assessing the same core factors: the feasibility and development margin, the sponsor's track record, the strength of presales relative to debt cover, the location and market depth, and the quality of the builder and building contract. A well-prepared information memorandum addressing all five shortens the path to credit approval at every layer of the stack.

Frequently Asked Questions

What is development finance in Australia?

Development finance is funding used across the full lifecycle of a property development — from holding land pre-DA, through construction, to completion. It typically combines several layers: senior debt (65–70% LVR/LTC), stretch senior (75–80%), mezzanine finance (up to 85–90% LTC) and preferred equity (up to 90–92% of total development cost). Evcorp Commercial structures development finance from $10M to $500M+ for residential, commercial, industrial and mixed-use projects across Australia.

How much equity do I need for development finance?

Most senior lenders require the developer to fund 20–35% of total development cost as equity, with the balance provided as debt. Mezzanine finance or preferred equity can reduce the equity requirement further — combined structures can lift total leverage to 85–92% of total development cost, though this increases the blended cost of capital. Evcorp models each capital stack option before recommending a structure.

What is the difference between development finance and construction finance?

Construction finance funds the building phase specifically — progressive drawdowns against certified milestones during a 12–24 month build. Development finance is the broader term covering the entire capital stack across a project's life: DA finance for the pre-construction holding period, senior and stretch senior construction debt, mezzanine and preferred equity to bridge the gap to full equity, and residual stock facilities to refinance unsold units at completion. Evcorp structures the full stack, not just the construction tranche.

What is DA finance?

DA finance funds a site's holding and approval costs — rates, land tax, consultants, planning fees — while a development application progresses. It bridges the period before construction finance can be drawn. It is typically structured as a land bank or bridging-style facility at up to about 60% LVR with a 12–24 month term.

What is a residual stock loan?

A residual stock loan refinances unsold units at practical completion out of the construction facility. It removes the pressure to discount stock to clear the construction lender and lets the developer sell down over time. Leverage is typically up to 85% LVR on the retained stock.

What is the difference between a development loan and a bridging loan?

A development loan funds the construction of a project and is drawn progressively against building milestones over 12–24 months. A bridging loan is a short-term facility that covers a timing gap — for example, holding a site while approvals or a sale complete — and is not drawn against construction progress. DA finance and land bank facilities are the bridging-style products used before a development loan starts.