Property Development Finance NZ

Property development finance funds the land acquisition, construction and holding costs of a residential or commercial development through to sale or refinance. The New Zealand market spans the main banks for prime borrowers with strong presales, through to specialist non-bank lenders for higher-leverage, faster-moving deals. Comparing lenders early is essential, because the difference between a workable funding stack and a stalled project usually comes down to terms negotiated up front, not just the headline rate.

What development finance covers in NZ

A development loan typically funds a percentage of the total development cost (LCR) and a percentage of the gross realisation value (LVR or LRV), whichever is the lower constraint. The facility usually pays down progressively as units settle on completion. Banks demand qualified presales, fixed-price builds with experienced contractors, and quantity surveyor sign-offs at each drawdown. Non-bank lenders are typically more flexible on presales and structure, but charge higher rates, larger establishment fees, and may sit in a stretch senior or mezzanine position behind the bank.

How to compare development lenders in New Zealand

Look at the total cost of capital across the project life, not just the per-annum rate. Establishment fees, line fees, exit fees, monitoring surveyor costs and minimum interest periods all add up. Check the presale requirement, whether interest is capitalised or paid in cash, the LVR and LCR caps, and the drawdown mechanics. Confirm the lender's experience with the asset class and region, their track record on completing deals, and the personal or corporate guarantees they require. Engage a specialist development finance broker if the funding stack is complex.

Common questions

How much equity do I need?

Bank funding usually requires 30% to 40% borrower equity, with non-bank stretch senior or mezzanine reducing equity to 10% to 20% in some cases. The lower the equity, the higher the cost of capital.

Do I need presales?

Banks usually require qualified presales of 50% to 100% of debt cover before construction draws. Non-bank lenders may fund with fewer or no presales, particularly for premium product where post-completion sale risk is lower.

What is mezzanine finance?

Mezzanine sits between senior debt and equity, taking a second-ranking security position. It costs more than senior debt but allows developers to do more projects on the same equity base, provided the underlying returns support the layered cost of capital.