Development Finance Melbourne — Boutique Development Funding Specialists

Why development finance is nothing like a home loan

A home loan finances a finished asset. Development finance funds the creation of an asset that doesn't exist yet — which means the lender is underwriting your project, your builder, your numbers and your ability to execute, all at once. Approval is not a yes/no on your income; it's a credit team's judgement on a funding table.

That changes everything about how the application must be built. Development lenders assess the total development cost (TDC), the gross realisation value (GRV) of the finished project, the loan-to-cost and loan-to-value ratios, presales coverage, builder capability and the sponsor's contribution and track record. A weak feasibility presented well will still be declined — but a sound project presented poorly gets declined too, and that happens far more often than developers realise.

This is where a banking background earns its keep. We build your funding submission the way development credit papers are written inside the banks: feasibility first, risks addressed before they're asked, and an exit strategy the lender can believe in.

What we fund

• Townhouse developments — duplexes and side-by-sides through to 10-unit infill projects, the bread and butter of Melbourne's middle-ring suburbs.
• Land subdivisions — residential land subdivision including civils funding, staged releases and englobo land settlement.
• Small apartment projects — boutique apartment developments where presales and builder strength drive the funding outcome.
• Commercial and mixed-use development — shop-top housing, office conversions, childcare and medical developments. See also commercial property finance for completed-asset lending.
• Knock-down rebuild and dual-occupancy — where the scale sits between a construction loan and a full development facility, we structure whichever serves the project better.
• Residual stock finance — releasing equity from completed but unsold stock so the next project doesn't wait on the last one's settlements.

How development lenders assess your project

The funding spectrum: banks, non-banks and private capital

Development funding sits on a spectrum, and the right position on it is a strategic decision, not a default:

• Major and regional banks offer the sharpest pricing but the strictest terms: meaningful presales, conservative ratios, and slower credit processes. Right for experienced developers with time and strong feasibility.
• Non-bank development funders price higher but move faster, accept reduced or nil presales and take a more commercial view of risk. Often the difference between starting this quarter and next year — and on a well-margined project, time saved is profit.
• Private and stretch-senior capital funds higher ratios or unusual scenarios. Used with discipline — and always with a clearly modelled exit — it has a legitimate place. Used casually, it consumes the project's margin. We model the total funding cost of every option side by side so the trade-off is explicit.

Because our panel deliberately spans all three tiers, the recommendation is driven by your project's numbers — not by what a single funder happens to sell.

The IFG development process

• 1. Feasibility review. Before anything goes near a lender we pressure-test your numbers: land, construction, professional fees, interest capitalisation, contingency, selling costs and margin. If the project doesn't stack, we tell you at the start — not after three months of applications.
• 2. Funding strategy. Presales vs nil-presales, bank vs non-bank, whether staging the project changes the funding maths. This conversation regularly reshapes the project itself.
• 3. Submission build. A development submission is a document set: feasibility, funding table, sponsor profile, builder pack, planning documents and sales evidence. Ours read like the credit papers Brian used to write, because that's the standard credit teams respond to.
• 4. Facility negotiation. Line fees, drawdown conditions, QS requirements, presale definitions and repayment triggers are all negotiable. The headline rate is a fraction of the true cost of a development facility.
• 5. Drawdowns to exit. We manage progress claims and QS certifications through the build, then plan the exit — sales settlements, residual stock refinance, or hold-and-refinance to a term facility — before it's due, not when it's due.

The true cost of a development facility — and how to control it

Developers comparing funders on the headline rate alone are comparing the wrong number. A development facility's real cost has five moving parts, and every one of them is negotiable or manageable:

• Line fees. Charged on the facility limit whether drawn or not — which is why an oversized facility quietly bleeds a project. We size facilities to the funding table, not to a round number.
• Capitalised interest. Interest compounds inside the facility during the build, so every month of program slippage costs twice: holding costs and compounding. A realistic build program in the feasibility protects your margin more than a sharp rate does.
• Establishment and valuation costs. Development valuations and quantity surveyor reports are substantial, and re-valuations triggered by changes cost again. Getting the scope settled before instruction avoids paying twice.
• Drawdown friction. Each progress claim certified by the QS takes time; slow certifications stall builders and stretch programs. We agree the drawdown mechanics in the facility terms upfront — it's a negotiation most borrowers don't know they can have.
• Early-repayment and extension terms. Projects finish early or late; facilities should accommodate both without penalty surprises. Extension pricing on a delayed project can consume a margin — we negotiate the extension terms while we still have leverage, which is before signing.

On a typical 4-townhouse project, the difference between a well-structured and a carelessly structured facility — identical headline rates — routinely runs to tens of thousands of dollars. This is the layer of the transaction where an ex-banker on your side of the table pays for themselves.

First development? Read this first

Many of our development clients are builders or investors stepping up from single dwellings to their first multi-unit project. It's a bigger step than it looks: the funding rules change, the documentation burden multiplies, and the risks compound quietly. Three things we tell every first-time developer:

Your equity does more work than you think. Land held at today's valuation — especially land you've improved through a planning permit — often contributes most of the required equity. A permit can be the most profitable thing you ever build.

Presales are a strategy, not a formality. Selling off the plan early costs margin but unlocks bank pricing; holding costs funding premium but captures the market on completion. The right answer depends on your margin, your holding power and the suburb's depth of buyers — we model both paths.

The exit is part of the application. Lenders won't fund a project whose ending they can't see. Whether you're selling everything, holding some units as rentals, or refinancing residual stock, the exit gets designed on day one.

Development funding across Melbourne's north-west

Our home ground is Melbourne's north and north-west — and it's one of the most active infill development corridors in the country. We fund townhouse projects in Glenroy, Pascoe Vale, Coburg, Fawkner and Reservoir, where generous mid-century blocks meet strong end-buyer demand; dual occupancies across the Keilor corridor and Essendon; and subdivision work in the growth areas around Craigieburn, Greenvale and Mickleham. We know which lenders currently have appetite for which postcodes — development appetite is suburb-specific and changes with valuer sentiment — and we can usually give you a realistic funding read on a site before you buy it. That conversation, before auction day, is free and often decisive. Talk to us before you commit to a site.

Illustrative scenarios

Composite examples with details generalised; outcomes depend entirely on individual circumstances.

• The builder's first fourplex. A Coburg builder with a permitted site wants to build four townhouses. Bank policy wants two presales; his margin is strong but he doesn't want to sell early in a rising market. We place the deal with a non-bank at nil presales, model the higher funding cost against expected price growth, and he sells three on completion — ahead of the feasibility in both time and margin.
• The subdivision with staged civils. A landowner in Melbourne's north subdivides eight lots. We structure the facility so civils fund in two stages against staged lot releases, halving peak debt and the interest bill — the difference between a marginal and a comfortable project.
• The stuck residual stock. A developer completes six units, sells four, and the construction facility expires with two unsold. We refinance the residuals to an investment-terms facility, releasing the personal guarantees and giving the units time to sell properly instead of at fire-sale pricing.