Written by David Lovato – CPC Lending Solutions

October 2025

Off-the-plan projects can be a smart way for developers to manage cash flow and secure early sales, but getting finance for them isn’t always straightforward. With construction costs, market confidence and lender appetite all shifting over the past few years, developers face a unique set of challenges when trying to get a project off the ground.

Here are three common financing challenges and practical strategies to overcome them.

1. Demonstrating project feasibility and profitability

Lenders have become increasingly cautious following the construction cost surge during COVID-19, when many projects became unviable due to rising expenses and stagnant sale prices. According to the Australian Bureau of Statistics (ABS), the average cost to build a house jumped 6.7% annually from 2019-20 to 2023-24.

This combination of rising costs and unpredictable market conditions led many lenders to tighten their lending criteria, requiring more robust feasibility and pre-sale evidence before approving funding.

The good news is that conditions have improved since then. Lower interest rates are boosting borrowing capacity and apartment prices have outperformed house prices across many capital cities over the past year. Cotality’s home value index for September showed apartment prices increasing more over the last 12 months than houses in Brisbane, Adelaide and Perth. 

For developers, this shift is important: Stronger apartment values improve project feasibility by widening profit margins, supporting higher-end values and helping to offset the impact of higher build costs. It also increases lender confidence, as projects are more likely to achieve sales prices that align with or exceed forecast levels.

Lenders will still want to see a detailed feasibility study demonstrating that a project is viable and profitable. Your feasibility should clearly show how your project capitalises on these improving conditions, with realistic cost estimates and conservative sale price assumptions.

Working with an experienced broker can help ensure your figures are accurate and presented in a way that builds lender confidence.

2. Managing volatile construction costs

While construction costs have stabilised compared to the extreme volatility of the pandemic, they continue to rise modestly. Cotality’s latest Cordell Construction Cost Index recorded a 2.5% increase in residential construction costs over the 12 months to September 2025, down from 3.2% over the same period last year. 

The current rate of growth is under the pre-pandemic decade average of 4.0%, but labour shortages and strong public infrastructure demand are likely to keep upward pressure on prices. This means that although construction cost growth is below long-term averages, margins remain tight. Material and labour costs are still elevated, and competition for skilled trades remains strong amid record infrastructure spending.

You should always enter into fixed-price building contracts where possible, or at a minimum, secure detailed quotes with realistic contingencies of 10-15%. 

Working with established builders who have weathered recent market volatility also demonstrates prudence to lenders. 

3. Meeting pre-sale requirements

Most lenders require a percentage of pre-sales before releasing construction funding. Traditionally, developers have needed to pre-sell between 50% and 80% of dwellings to qualify for loans – a significant hurdle that often delays or stalls projects.

However, many lenders also favour boutique-style apartment developments, typically between four and 20 units.

Developers who “meet the market” – through design, pricing and location – are more likely to secure pre-sales early. This offers an opportunity for smaller projects to secure funding over larger, more risky developments. 

For instance, the luxury apartment market continues to perform well, driven by downsizer demand. According to Longergan Research, 40% of respondents in New South Wales and the ACT aiming to downsize in the next five years say they are looking for an apartment and 23% of respondents say they will switch to a smaller home but at the same price as their current house. 

This demographic shift is underpinning strong demand for premium, low-maintenance apartments in desirable suburbs, helping you achieve faster pre-sales and improve your eligibility for construction funding.

In NSW, you may also benefit from the state government’s new $1 billion Pre-Sale Finance Guarantee scheme, designed to ease funding bottlenecks by helping eligible off-the-plan projects access finance with lower pre-sale thresholds. The scheme, which launched officially in September 2025, could provide additional flexibility for developers meeting at least half of their pre-sales targets.

CPC will take a closer look at how the scheme works – including eligibility criteria, benefits and potential lender impacts – in next month’s detailed analysis.

Seizing the opportunities 

Off-the-plan developments remain an attractive opportunity for experienced developers and small building companies. The key is balancing project feasibility with lender expectations, and that starts with having the right finance partner.

An experienced broker can help you identify lenders that are open to smaller or boutique projects, navigate pre-sale requirements and structure funding to suit project timelines. We can also negotiate flexible terms and ensure you are well-prepared to meet lenders’ criteria from the outset.

CPC Lending Solutions is a property development and residential finance specialist. Whether you’re a developer needing funding for land, construction, or residual stock, or a buyer looking for the right mortgage, we’re here to help. Contact us at info@crowdpropertycapital.com.au or fill in this form.

Written by David Lovato – CPC Lending Solutions

August 2025

In an effort to fast-track new housing and tackle New South Wales’ affordability crisis, the state government has launched the NSW Housing Pattern Book – a collection of architect-designed plans available for as little as $1 per design, complete with a streamlined approval pathway. 

What is the Housing Pattern Book?

The Pattern Book features eight architect-designed templates for terraces, townhouses, semis and manor homes. These are the “missing middle” housing types that bridge the gap between detached houses and high-rise apartments. 

The designs were created by respected architects and are standardised for efficiency, yet adaptable to different site conditions and client preferences, including varying room formations and layouts.

These designs are backed by the NSW Low and Mid-Rise Housing Policy which encourages development particularly near town centres and transport hubs.

The state government says these designs can be approved via a Complying Development Certificate (CDC) in as little as 10 days, cutting months off the traditional development application process.

What does the Housing Pattern Book include?

The Pattern Book offers ready-made designs and quick approval times, but it is not a full-service solution. You’ll still need:

• Site-specific engineering
• Energy assessments
• Bushfire, soil or flood adaptations
• Compliance sign-off and construction documentation

And while it reduces red tape, it also does not address high land costs, labour shortages or rising prices of building materials – all factors impacting housing delivery in the state.

What does a home from the Housing Pattern Book cost?

The plans are currently available for $1 until January 2026, after which they’ll be priced at $1,000. The state government said this is considerably lower than the upwards of $20,000 developers and investors typically spend on custom architecturally designed homes. 

But the bigger question is how much will they cost to build?

According to Rider Levett Bucknall, residential construction costs in Sydney in 2025 range from $2,500 to $7,600 per square metre. With Pattern Book home sizes ranging from 90 to 140 sqm, that puts base build costs somewhere between:

• $225,000 to $350,000 (lower range)
• $684,000 to $1.06 million (upper range)

These ranges exclude the cost of land. The Urban Development Institute of Australia found the average cost of a vacant lot in Greater Sydney was $666,670 in 2025.

The above costs also exclude site-specific modifications, compliance documents and construction certificates. But it provides a baseline. The standardised design and construction methodology could help keep costs down, especially if developers can build at scale.

While the government hasn’t put a specific price on the build cost of these homes, a government official told The Guardian that using the pattern book could result in construction cost savings of 5% to 17% compared to other non-pattern book designs.

What does the Housing Pattern Book mean for securing finance?

From a financing perspective, the most powerful benefit of the Pattern Book is the reduction in time and uncertainty. By offering pre-approved designs and a fast-tracked approval pathway, the Pattern Book brings a level of predictability that has direct financial benefits, including:

• Potentially lower holding costs from faster approvals
• More accurate feasibility assessments due to predictable input costs
• Improved cash flow from lower upfront design costs
• Easier comparisons of builders’ quotes thanks to the standardised designs

For lenders, this increased certainty is a big plus. When the design, planning pathway and cost inputs are largely known upfront, it can be easier to assess project risk and funding requirements. That can improve confidence in the numbers, reduce the back-and-forth during loan assessment and, ultimately, make it faster and simpler to secure finance.

Headline image: Terraces 01 by Carter Williamson, one of the eight approved designs. Credit: planning.nsw.gov.au 

CPC Lending Solutions is a property development and residential finance specialist. Whether you’re a developer needing funding for land, construction, or residual stock, or a buyer looking for the right mortgage, we’re here to help. Contact us at info@crowdpropertycapital.com.au or fill in this form.

Written by David Lovato – CPC Lending Solutions

July 2025

When applying for development finance, understanding how lenders assess risk can significantly improve your chances of approval. Beyond the numbers, they evaluate the project’s viability, your experience and the safeguards in place if things don’t go as planned. 

Here are five core considerations:

1. What level of security can the borrower offer?

Security gives lenders protection if the loan isn’t repaid. In development finance, this usually includes:

• First mortgage over the site – This is the main form of security, giving the lender the right to sell the land if the loan defaults.
• General Security Agreement (GSA) – Covers broader business assets like equipment, IP, and income rights.
• Directors’ personal guarantees – Adds extra assurance by making you personally liable if the company defaults.

The stronger the security, the more favourable your funding terms are likely to be.

2. What experience does the borrower and project team have?

Lenders prefer borrowers with a proven track record. They’ll assess your past projects and your team’s experience, including the builder, project manager, and consultants. A capable, experienced team gives lenders confidence that the project will be delivered on time and within budget.

3. What level of funding is required?

Be clear about how much funding you need and how it compares to the project’s value and cost. Lenders look at:

• Loan-to-Value Ratio (LVR)
• Loan-to-Cost Ratio (LCR)

Lower ratios mean lower risk, which can lead to better terms. Having your own equity invested is also viewed favourably.

4. Is the project profitable?

Lenders want to see that the project has a healthy profit margin. A well-prepared feasibility, supported by budgets, timelines and market data, helps build confidence. Pre-sales can further strengthen your case by showing demand and providing a clearer loan repayment pathway.

5. Are there contingencies and an exit strategy in place?

Lenders want to know you’ve accounted for risks like delays, cost overruns, and planning issues. A clear exit strategy – whether through pre-sales, asset sales, or refinancing – is essential. Strong risk management and a defined loan repayment plan go a long way in securing approval.

Need expert guidance? CPC Lending Solutions specialises in development finance for land, construction, and residual stock. We help structure your application and connect you with the right lender. Email us at info@crowdpropertycapital.com.au or contact us here.

Written by David Lovato – CPC Lending Solutions

April 2025

Property development can often be complex as it encompasses everything from land acquisition to construction and fitout.

To ensure that property development projects can be completed and potentially turn a profit, understanding the different financing options is key. By delving beyond means of senior debt, developers can access another level of funding that could prove beneficial both now and in the future.

Taking up their own space in the capital stack are the opportunities of mezzanine financing and preferred equity financing. Understanding the subtleties between these financing options helps developers answer the common question: “which option is more suitable for my project?”.

What is Mezzanine Financing?

Mezzanine financing is essentially a hybrid of debt and equity that sits between senior debt and common equity in the capital stack. As such, it is often viewed as an option for developers who are looking to bridge a funding gap. 

To understand the intricacies of mezzanine financing and how it might be applicable to a property development project, it’s essential to also acknowledge common terms such as senior debt and capital stack.

As such, senior debt is defined as borrowed money that a company must repay first. As this type of debt has the highest priority, it bears the lowest risk which, in turn, results in lower interest rates. The most common type of senior debt is from financing institutions like banks.

In relation to the capital stack, this is a term used to refer to the layers of capital that have gone into a project. The capital stack highlights who will receive funds or profits and in what order this will take place. 

With this in mind, mezzanine financing is often referred to as the middle layer in the capital stack as it falls between senior debt and any equity. As the debt is secured and falls in this middle layer, such a loan will carry a higher risk profile, resulting in higher interest rates. 

Despite the associated higher interest rates and the potential of lenders imposing stricter borrowing conditions, mezzanine financing is a viable and common option for property development projects. Especially when you consider that it is non-dilutive.

What is Preferred Equity Financing?

Preferred equity is another common financing option utilised by property developers. Preferred equity financing involves the developer giving the lender a stake in the project. In relation to the capital stack, preferred equity sits above common equity but below debts such as mezzanine. 

With this positioning in the capital stack, the provider of preferred equity financing will receive profits and have their debts repaid before common equity stakeholders such as the developer themselves.

This level of ownership also affords the lender or the investor with the ability to be involved in a decision making level. There is also the ability to take control of the project if things are not following the outlined plan.

Key Differences Between Mezzanine and Preferred Equity?

Where mezzanine financing is viewed as bridging the funding gap, preferred equity is seen as sharing the risk and reward of a project. As such, there are many key differences between mezzanine and preferred equity financing for property development funding.

Where mezzanine financing is viewed as bridging the funding gap, preferred equity is seen as sharing the risk and reward of a project. As such, there are many key differences between mezzanine and preferred equity financing for property development funding.

Benefits and Drawbacks of Each Financing Option

As financing options for property development both mezzanine and preferred equity financing have positive and negative aspects that need to be considered. Understanding the intricacies of both will help developers choose the right method of alternative financing for their specific project.

Mezzanine Financing

One of the main benefits of mezzanine financing is the ability to secure funding without having to dilute the share of equity. Additionally, as this method of financing acts as a second mortgage of sorts, there are fixed repayment terms. This helps to provide predictability which plays a large role in having the money set aside to make the payments. It is also worth noting that interest payments may be deducted as an expense, making them tax deductible.

With mezzanine financing there are also negatives to consider, namely, the fact that due to the increased risk, interest rates will be higher. This leads into another negative as with mezzanine financing there is a larger risk involved because of the increased debt and interest obligations. As a secured form of financing, mezzanine lenders have the right to collateral in the case of default which can lead to foreclosure.

Preferred Equity Financing

Preferred equity financing can be a viable option for property developers looking to finance their latest project without increasing debt ratios. For example, this type of financing can be structured flexibly so that investors do not receive additional profits if returns outperform expectations. It’s also worth noting that mandatory interest payments can be deferred during the construction phase to help developers increase cash flow at such a pivotal point in the project.

When opting for preferred equity financing, developers sacrifice both profit and control. With preferred equity, investors will also receive higher returns when compared to mezzanine financing. With preferred equity investors receiving a portion of the profits, developers have to share the reward of their hard work. It’s important to highlight that if preferred equity investors have negotiated voting rights, they can also influence how a project progresses.

When to Choose Mezzanine vs Preferred Equity

When choosing between mezzanine and preferred equity financing it’s important to approach the decision with an outcome in mind. If you’re looking for a tool by which to bridge a gap in funding, mezzanine will be the most obvious choice. For those wanting to share both the risks and rewards of the project with another party, preferred equity is advisable.

The right choice will be dependent upon a variety of different factors as well as project specific features. This is why the risk appetite of the developer and the project’s overall financial profile heavily influence the final decision.

There are situations where one alternative is more suitable than the other. As an example, a project where cash flow is limited may find financing a mezzanine debt difficult. Therefore, rather than going into more debt, the developer leverages preferred equity’s profit participation to access the funds needed to complete the project.

As another example, consider a developer with stable cash flow projections looking to help secure the extra funds needed to help complete a portion of the project that has yet to sell off the plan. Rather than giving up profit participation in the overall project, choosing mezzanine financing means maximising leverage today without diluting ownership tomorrow.

CPC’s Role in Property Development Financing

As a fully independent finance brokerage, CPC Lending Solutions works with developers to find solutions tailored to suit both financial circumstances and the overall goal of the project. All of which lays the foundation needed to structure the right funding mix.

By offering tailored services, CPC Lending Solutions investigates different funding models so that the final outcome – be it undertaking a mezzanine loan, preferred equity financing or a hybrid funding model – is the most suitable for your personal and professional needs.

Development and construction financing models can be complex, however, this highly specialised area of financing is a key skill of CPC Lending Solutions. Our expertise works as a key asset for developers looking to capital stacks to help optimise project returns.

Choosing the Right Financing for Your Project

Funding a property development project can be a complex endeavour. In order to achieve the best outcome possible, developers may need to look at the different layers of the capital stack. In property development financing, key components of the capital stack are mezzanine and preferred equity financing.

While both provide funds to property developers, each financing option has unique characteristics. To choose between taking on a mezzanine loan, which is also referred to as another layer of debt, versus preferred equity financing, where part of the exchange involves sharing control and profits, developers need the right guidance.

CPC Lending Solutions have the experience and expertise to help structure the most suitable financing package for your project, no matter how complex the capital stack may seem. Contact David Lovato on 0434 932 634 or email dlovato@crowdpropertycapital.com.au to explore flexible funding options for your next development project.

Written by David Lovato – CPC Lending Solutions

February 2025

When planning to build a new home, a common question asked by borrowers is “Does a construction loan include land?”. Understanding this and how a construction loan works can impact your financial strategy.

A construction loan is a type of short-term financing designed to cover the cost of building a new dwelling or substantially renovating an existing one. Unlike a conventional mortgage, which provides a lump sum upfront for the purchase of an existing property, a construction loan is paid out in stages as your building project progresses. This is also known as ‘drawing down’ your funds.

One of the key differences between a construction loan and a regular mortgage is that you will only pay interest on the amount drawn down in your construction loan. This can help keep your monthly repayments lower.

It is a common assumption in property development financing that construction loans automatically include the cost of the land, too.

Does a construction loan cover land?

Whether or not a construction loan covers land depends on the lender.

Some lenders allow borrowers to bundle the purchase of land with the construction of the dwelling into one home loan. This single loan covers both land acquisition and construction. The loan will be disbursed in stages, with the first release of funds used to purchase the land. Thereafter, the loan functions as a construction loan, paying out in stages as your build progresses.

But, other lenders do not offer a bundled loan, instead allowing separate financing. This might require you to take out a land loan first and then apply for a construction loan once the building plans have been finalised.

From a lender’s perspective, these two options cover a range of scenarios, including developers or borrowers who already own the land and now just require financing to build the dwelling. 

Additionally, for landowners who have low or no debt on their land, some lenders may offer an equity release option. This allows the landowner to access the equity in their land as part of the construction loan, providing additional funds for the project or even for securing their next development. 

In certain scenarios, the lender may provide a cash-out component at the start of construction, allowing developers to secure their next project while the current one is being built. This will depend on maintaining the overall construction maximum loan-to-value ratio (LVR), but it can be particularly helpful for developers managing overlapping projects.

However, this process varies from lender to lender, so it’s recommended you work with an experienced finance broker who can help you find a loan that suits your current financial situation and long-term goals. 

At CPC, we understand that every project is unique. Our approach to property development financing is to work closely with borrowers to understand their specific circumstances and tailor a financing solution that meets their individual needs. We consider the project as a whole, including the land acquisition if necessary, to find a financing solution that works for you.

Key factors that determine construction loan structure

Lenders will assess several criteria when deciding whether a construction loan can include the land purchase. These may include:

• LVR: This represents the percentage of the total project cost (including land) covered by the loan amount. A lower LVR means you will need a larger deposit.
• Borrower’s deposit: If you want to include the purchase of the land in your construction loan, you may need a larger deposit. 
• Construction timeline: Some lenders require construction to commence within a set period after the land purchase. This ensures that the land is used as intended and that the project progresses as stated in the plans.
• Land zoning and permits: Lenders often require approved building plans and necessary permits before approving land financing to reduce the risk of project delays or complications.

Construction loan versus land loan: What’s the difference?

If a bundled loan is not an option for you, or there are other reasons you want to separate the two, it is helpful to know what the differences are between a construction and land loan.

Land loan: This is typically used to purchase vacant land without immediate plans for construction. This type of loan often has shorter terms and higher interest rates than construction loans

Construction loan: This will finance the building of the dwelling and is drawn down in stages. Borrowers will likely be required to provide approved plans to the lender.

How CPC helps borrowers finance land and construction

At CPC Lending Solutions, we understand that every borrower’s situation is different. Whether you need a construction loan for land and building, a separate land loan, or alternative financing options, we can help find a solution that aligns with your property development goals.

Our expertise is in property development financing, which allows us to find flexible and tailored loans for your project’s needs. Working with a specialised lender like CPC Lending Solutions means you have access to more knowledge of the industry as well as personalised service. 

If you’re exploring how to finance land and construction, our team at CPC can guide you through the process. Contact CPC Lending Solutions today to discuss your construction and land financing needs.