Commercial Construction and Development Finance in Australia: The 2026 Guide

The Capital Stack, Not a Single Loan

A home loan is one lender providing one facility against one property. A development project is usually funded by a stack of different capital sources layered on top of each other, each with a different risk position, cost, and priority of repayment if the project runs into trouble.

Every layer above senior debt exists to fill the gap between what the bank will lend and what the project actually costs to build, without requiring the developer to fund that gap entirely from their own cash.

How Much Lenders Will Actually Fund

Development lending is sized against two different metrics, and lenders apply whichever produces the lower, more conservative number. Gross Realisation Value (GRV) is the total expected sale value of the finished project; Total Development Cost (TDC) is what it actually costs to build, including land, construction, fees, interest, and contingency.

Banks typically cap senior debt at 75% to 80% of TDC, or 60% to 65% of GRV, whichever is lower. Non-bank and private senior lenders will commonly stretch to 65% to 75% of GRV, and occasionally as high as 80% on a strong project, but at a higher margin than a bank would charge for the equivalent deal.

Presale Requirements: The Biggest Variable

Presales, contracts of sale signed with genuine buyers before or during construction, are one of the most important levers in whether a project gets funded at all. A presale reduces the lender's risk because it demonstrates real market demand and provides a contracted source of repayment once the project settles.

For build-to-rent and owner-occupier commercial projects, where there is no intention to sell individual units, presale requirements typically do not apply in the same way, and lenders instead focus on projected rental income or the strength of the occupying business.

Mezzanine Finance: Bridging the Equity Gap

When senior debt does not cover enough of the project to leave a manageable equity requirement, developers turn to mezzanine finance. It ranks behind senior debt for repayment, which makes it materially riskier for the lender, and is priced accordingly.

Combining senior debt with mezzanine finance can lift total project funding to 85% or 90% of TDC, sharply reducing the cash equity a developer needs to contribute, at the cost of a much higher blended interest rate across the whole stack.

What Development Finance Costs in 2026

Unlike a residential home loan, there are no advertised card rates in commercial and development finance. Every deal is priced individually against the borrower's financial strength, the security, the loan-to-value ratio, and the documentation provided. That said, clear bands exist across the market.

As a rule of thumb, every 10 percentage points of lower LVR can save roughly 0.25 to 0.75 percentage points on the senior debt rate, making a larger equity contribution one of the most direct ways a developer can reduce financing costs. For a comparison of standard commercial property loan pricing outside development finance, see our guide to owner-occupier, investment, commercial and SMSF loan rates.

Key Terms Explained

Development finance carries its own vocabulary that does not appear in standard home loan conversations. Understanding these terms makes it far easier to compare offers between lenders.

Lenders will use these terms interchangeably in term sheets and feasibility discussions, so confirming exactly which metric a quoted LVR applies to, GRV or TDC, before comparing two offers is essential; the same LVR percentage can represent very different dollar amounts depending on which base it is calculated against.

Preparing a Bankable Feasibility

Before any lender will issue terms, they need a feasibility study that stacks up: realistic sale or rental assumptions, a fixed-price building contract or detailed cost plan, and a contingency allowance that reflects genuine risk rather than an optimistic best case.

• Use conservative sale price assumptions. Lenders will stress-test your GRV against recent comparable sales, not your own projections, so building in a margin of safety upfront speeds approval.
• Hold a genuine contingency, typically 5% to 10% of TDC. Projects that arrive at the lender with no contingency line are treated as higher risk, regardless of how strong the underlying numbers look.
• Engage a quantity surveyor early. An independently verified cost plan carries far more weight with a lender than a builder's own estimate, especially for larger or more complex projects.
• Line up presale or pre-lease interest before applying. Even non-binding expressions of interest can strengthen a funding application, and formal presale contracts materially expand which lenders will consider the deal.