Ground-Up Development Finance
Ground-up development finance provides staged funding for new-build property schemes, from site acquisition and commencement through construction to completion.
The lender needs confidence that the land, build, borrower, numbers and exit work together.
Minimum development finance facility: £350,000
Ground-up development finance funds a changing asset.
At the start of a ground-up development, the lender may be taking security over land or a cleared site. By the end of the facility, that security should have become completed houses, apartments or another finished property asset.
The lender is therefore exposed not only to property value but also to the ability of the developer and contractor to deliver the scheme within budget and programme.
That is why ground-up development finance is normally structured around a detailed development appraisal rather than a simple loan-to-value calculation.
The loan is funding the journey from land value to completed value. The lender needs evidence that the journey is achievable.
Ground-up development finance can support different new-build schemes.
Scale matters, but so do planning, construction complexity, borrower experience, market demand and exit.
Single houses
Individual new-build properties where the project is supported by a realistic cost plan, value and exit.
Small housing schemes
Multiple-house developments where construction sequencing, infrastructure and sales timing become increasingly important.
Apartment developments
New-build flats where build programme, specification, sales values and the concentration of exit risk need careful assessment.
Mixed-use schemes
New developments containing residential and commercial elements with potentially different valuation and exit assumptions.
Phased development
Larger schemes completed in phases, where the lender may consider how sales and completed phases interact with future construction.
Part-built acquisition
Purchase or refinance of a scheme already under construction, subject to a reliable cost-to-complete position.
What lenders focus on in a ground-up development.
The lender is assessing whether enough money, time, experience and value exist to complete the scheme and repay the facility.
Land & planning
Site ownership, consent, conditions, access and whether construction can start as assumed.
Developer
Relevant track record, financial resilience and ability to manage the project when events differ from plan.
Contractor
Experience, financial standing, procurement route and ability to deliver the proposed build.
Cost plan
Detailed build costs, professional fees, infrastructure, contingency and whether the overall budget is realistic.
Programme
Construction timescale, critical stages and sufficient allowance for practical completion and exit.
GDV
Independent evidence for completed values and whether local demand supports the proposed pricing.
Equity
The developer’s contribution and whether sufficient capital remains exposed to absorb reasonable stress.
Exit
Sale or refinance assumptions, expected timing and a defensible fallback if the market is weaker.
Planning permission is only one part of construction readiness.
A site can have planning consent and still face practical obstacles to commencement. Lenders will want to understand whether important planning conditions, building regulations, utilities, access or other matters could interfere with the programme.
The position does not need to be identical for every lender, but unresolved issues should be understood rather than discovered after completion of the finance.
GOV.UK confirms that building regulations approval is separate from planning permission.
| Planning | Is the consent current, implementable and consistent with the proposed scheme? |
|---|---|
| Conditions | Are there pre-commencement or other conditions that could delay the start? |
| Building regulations | Is the technical approval route sufficiently advanced for the intended programme? |
| Services | Are utilities and infrastructure available on a realistic cost and timetable? |
| Access | Does the site have the rights and practical access needed for construction and completed use? |
| Title | Are there covenants, boundaries or rights capable of affecting delivery or value? |
The full facility is not normally handed over at the beginning.
Ground-up development finance is commonly drawn in stages so the lender’s exposure increases as value is created through construction.
Initial advance
Funds may support the site purchase, refinance existing land debt or provide the first agreed construction contribution.
Works progress
The developer completes construction from the available funds and agreed borrower contribution.
Monitoring
The lender’s monitoring surveyor reviews progress, expenditure and the remaining cost to complete.
Next drawdown
Further lender funds are released when the relevant conditions and certification requirements have been satisfied.
The drawdown structure should ensure that enough money remains available to finish the project, not merely to fund the next stage.
Leverage is only useful if the project still has room for things to go wrong.
Lenders commonly look at borrowing against both project cost and completed value. Maximum percentages vary by lender, scheme and borrower, so they should not be viewed as the starting point for deciding how much debt the project ought to carry.
The practical issue is whether the scheme retains enough equity, contingency and profit to absorb reasonable changes in cost, value or timing.
- Site or acquisition cost
- Construction cost
- Professional and statutory fees
- Finance costs
- Infrastructure and abnormal costs
- Contingency
- Completed value
- Developer profit
| Current value | What is the lender’s security worth before construction? |
|---|---|
| Cost to complete | How much money is genuinely required to reach practical completion? |
| GDV | What is the independently supported value of the completed development? |
| Borrower equity | How much cash has the developer committed and what remains at risk? |
| Contingency | What capacity exists to absorb unexpected construction costs? |
| Margin | Does the development remain commercially worthwhile after finance and stress? |
What we need to understand the scheme.
A first review does not require every lender document, but the core development assumptions need to be sufficiently clear to test the proposal.
- Site address and tenure
- Planning position
- Purchase price or current land value
- Build cost schedule
- Professional fees and contingency
- Expected GDV
- Developer equity
- Developer and contractor experience
- Build programme
- Sales or refinance exit
Ground-up schemes can go wrong in predictable ways.
Cost overrun
Construction costs move beyond budget and contingency, increasing the need for borrower equity.
Programme delay
Construction takes longer, increasing interest and reducing the time available for exit.
Contractor failure
Replacing a contractor can create delay, cost uncertainty and a revised cost-to-complete.
GDV weakness
Completed values fall below the original appraisal, reducing both profit and lender headroom.
Sales slow
The build may finish on time while the repayment period becomes longer than expected.
The build programme and exit programme should be considered together.
Practical completion does not itself repay the development facility.
Where completed units will be sold, the lender will consider likely sales values, absorption rate and the time needed to clear enough debt.
Where property will be retained, the proposed investment refinance should be tested against expected value, rent and longer-term lender criteria.
Where a scheme is complete but sales require more time, development exit finance may potentially replace the construction facility.
Understand the scheme. Test the build. Prepare the credit case. Then select the lender.
Ground-up development finance works best when lender selection follows a proper assessment of the scheme rather than starting with the maximum leverage available.
Understand
Establish the site, planning, developer, contractor, costs, programme and exit.
Test
Assess cost-to-complete, contingency, equity, GDV, leverage, margin and timing.
Prepare
Build a professional lender pack with the evidence needed to support the credit case.
Present
Approach lenders whose appetite and drawdown structure fit the actual development.
Frequently asked questions
What is ground-up development finance?
Ground-up development finance is specialist short-term funding used to construct new property from a development site. Construction funds are normally released progressively as the build proceeds.
Can ground-up development finance include the land purchase?
Potentially. A facility may include an initial advance towards acquisition or refinance of the site together with staged construction funding, subject to lender criteria and borrower equity.
How are construction funds released?
Funds are generally released through agreed drawdowns as construction progresses, commonly following monitoring-surveyor inspection and confirmation of the work completed.
How much equity does a developer need?
The required contribution varies by lender, scheme and developer. Lenders generally want meaningful borrower equity exposed and sufficient headroom for project risk.
Can first-time developers obtain ground-up development finance?
Potentially. The lender may favour a simpler scheme, experienced contractor, stronger professional team and more conservative leverage where the developer has limited completed track record.
How is ground-up development finance repaid?
Repayment commonly comes from sales of completed units, investment refinance or an appropriate development exit facility after practical completion.
Discuss a ground-up development.
For development finance requirements of £350,000 or more, send us the site, planning position, acquisition cost, build budget, expected GDV, equity contribution, programme and intended exit.
We will assess the project from the lender’s perspective before deciding which structures and lenders appear appropriate.
This page provides general information about commercial property development finance and does not constitute personal financial advice. EAS Finance is a trading name of Elite Admin Services Ltd (FRN 1044838), an appointed representative of White Rose Finance Group Ltd (FRN 630772), authorised and regulated by the Financial Conduct Authority. EAS Finance is a credit broker, not a lender. Lending terms and criteria vary by transaction and lender.