A lower-than-expected development valuation can change the amount a lender is prepared to advance. Before looking for another loan, establish which value has changed, how the lender has applied it and what the revised project needs to reach completion and repayment.
This guide concerns business-purpose property development finance in Australia. It is general information, not a valuation, loan offer or legal, tax or financial advice. All funding remains subject to lender assessment and approval.
First, identify the actual shortfall
The developer’s forecast, the valuer’s reported figure and the lender’s accepted lending value may differ. Ask the lender to explain the valuation basis used for its decision and any separate credit adjustments. A lower facility offer may also reflect costs, presales, equity, security or policy constraints rather than valuation alone.
- Is the figure for the site as it stands, or for the proposed completed development?
- Does it cover the same lots, floor areas, approvals and development scope as your feasibility?
- What valuation date and material assumptions apply?
- Is the comparison based on aggregate individual sales, a bulk sale or another stated basis?
- Which loan-to-value or loan-to-cost limit actually constrains funding?
RICS describes development valuations as complex and potentially subject to substantial variation. Its development-property valuation guidance provides professional context. The starting point is understanding the assessment, not assuming the original feasibility must be correct.
Recalculate debt and equity together
Gross realisation value (GRV) is not net profit or guaranteed borrowing capacity. Recalculate each relevant funding constraint and then reconcile the facility with existing debt payouts, retained interest, fees, eligible costs and the timing of drawdowns.
Hypothetical example only—not lending terms: suppose accepted costs are $8 million. An illustrative 65% value cap against a forecast completed value of $10 million would be $6.5 million. An illustrative 75% cost cap would be $6 million, so the cost cap initially limits the facility to $6 million. If the accepted completed value falls to $9 million, the value cap becomes $5.85 million. With the other assumptions unchanged, the facility ceiling falls by $150,000—not by the full $1 million valuation movement.
The simple cost-minus-debt gap increases from $2 million to $2.15 million. Actual cash still required depends on equity already contributed, existing debt, accepted cost definitions, deductions and conditions. The lender could impose a lower limit or decline. Do not count existing land equity as both an asset contribution and cash available to pay contractors.
For the underlying calculation, see our development finance equity-gap guide. The development feasibility calculator can help explore assumptions, but cannot replace lender assessment or a professional project feasibility.
Raise factual questions with evidence
Ask the lender what valuation-review process is available and what information it can share. Where you identify an apparent factual error or omitted evidence, prepare a concise schedule explaining the issue and attaching support. Relevant material may include endorsed plans, verified areas, title information, executed sale contracts and comparable settled transactions.
Explain why a comparison is relevant, including its date, location, condition, size and sale terms. Asking prices and optimistic agent opinions should not be treated as equivalent to verified settlements. RICS publishes guidance on comparable evidence and the relative importance of different sources.
A review may confirm the original result. Do not pressure a valuer to reach a target figure, conceal unfavourable evidence or assume another valuation will be higher. Before paying for another report, confirm whether the lender would accept it.
Compare responses without assuming more debt is the answer
- Additional equity: establish the source, availability and effect on your remaining contingency and other commitments.
- Revised scope or staging: test whether changes improve the project after redesign, approval, contract and timing costs. Obtain necessary consents.
- Revised finance: compare the full cost, conditions and repayment burden. Another lender will make its own assessment and may reach a similar conclusion.
- Junior debt or an equity partner: consider senior-lender consent, ranking, control, priority returns and reduced developer surplus. These are not automatic solutions to an unviable feasibility.
- Pause or reconsider: if the revised project lacks adequate margin, liquidity or a credible exit, proceeding with more leverage may increase the loss exposure.
Test the revised project through to repayment
Update the monthly cash-flow forecast, not just the loan amount. Model lower proceeds, delayed approvals or settlements, higher remaining costs and additional interest. Identify who funds each shortfall and when a decision must be made. An extension or refinance is not guaranteed.
If a purchase settlement or existing facility expiry is approaching, tell your lender and independent legal adviser promptly. Review contractual deadlines before making new commitments; do not rely on a pending valuation review as settled finance.
Prepare a clear reassessment file
- Current proposal, lender feedback and valuation information available to you.
- Original and revised feasibility, with changed assumptions highlighted.
- Sources and uses, debt payout, facility deductions and drawdown timetable.
- Evidence of equity contributed and additional funds available.
- Approvals, plans, contracts, current cost-to-complete and contingency.
- Sales evidence, repayment timetable and downside alternatives.
Bring the revised figures together before requesting a funding solution. Our property development finance assessment guide explains the broader evidence required. Discuss your development scenario with Basic Finance Loans, including the accepted value, requested funding, project stage and proposed exit.