Private Finance for Melbourne Development Sites: Acquisition, Holding Costs and Exit
A development site can be funded before construction begins, but the lender needs to understand the current land value, planning pathway, holding costs, existing approvals, borrower capability and the exit if the proposed project changes or takes longer.
Commercial and business-purpose finance only. Finance is subject to assessment, valuation, lender criteria, documentation, acceptable security and a credible exit. Obtain independent legal, planning, tax, valuation and development advice.
Site finance should be based on the property’s current legal and physical position—not only the developer’s future concept. The credit case improves when planning risk, costs, time and alternative exits are clearly documented.
When may private development-site finance be considered?
Site acquisition
Complete a time-sensitive purchase while planning, presales or longer-term development finance are still being prepared.
Land-bank refinance
Repay maturing debt and hold the site during planning, design, leasing, presale or market preparation.
Planning and consultants
Fund approved design, planning, engineering, surveying and professional work required before a construction facility.
Equity release
Release approved site equity for another genuine commercial or development purpose.
Land acquisition finance and construction finance are different credit stages. A land facility may not fund civil or building works unless those works, budgets, approvals and controls are specifically assessed and approved.
What does a lender examine in the site?
- current market value and comparable sales;
- title, ownership, easements, covenants and access;
- planning zone, overlays and existing permits;
- current improvements, tenancy, demolition and site condition;
- services, infrastructure and authority requirements;
- contamination, fill, geotechnical and environmental issues;
- existing debt, caveats, options and priority interests;
- approved and proposed development schemes;
- holding costs and required borrower equity; and
- primary and fallback repayment exits.
The lender may consider both current “as is” value and a supported future scenario, but funding and conditions should match the stage actually reached.
Why does planning status affect private finance?
Victoria’s planning schemes use zones and overlays to control land use and development. A site’s address or nearby project does not prove that the borrower’s proposal is permitted or likely to be approved.
No permit application
The lender assesses current site value, concept evidence, planning advice, likely timeframe and fallback use.
Application lodged
Plans, reports, requests for information, objections and authority issues help show the actual pathway and remaining risk.
Permit issued
Conditions, expiry, endorsed plans, agreements and outstanding pre-commencement requirements still require review.
Permit amendment
A proposed redesign may affect value, timing, costs, approvals and the construction-finance exit.
The Victorian Government explains that a zone sets out whether uses are permit-free, permit-required or prohibited, while development works may have separate permit requirements. VicPlan can generate zone and overlay mapping, but the borrower should obtain site-specific planning and legal advice.
Build a complete holding-cost budget
A site can consume cash while producing little or no income. The finance requirement should extend beyond the purchase price or current mortgage payout.
Property costs
- rates and land tax;
- insurance and security;
- maintenance and utilities;
- existing lease or vacancy costs; and
- demolition or make-safe work.
Project preparation
- architect and planning;
- survey and engineering;
- environmental and geotechnical;
- authority and legal costs; and
- valuation and quantity surveying.
Add interest, lender costs and a contingency for planning or market delays. A short facility with no funded holding capacity can reach maturity before the construction or refinance exit is ready.
For Victorian acquisitions, duty and the commercial and industrial property tax transition may affect the budget depending on property use and transaction history. Obtain current advice from the solicitor and tax adviser.
How might a Melbourne development site be financed?
- First-mortgage acquisition facility: finance secured over the purchased site, subject to current value and borrower contribution.
- Refinance and approved cost facility: repay existing debt and fund defined planning or holding costs.
- Second mortgage: supplementary funding behind an existing first lender where equity, consent and priority permit.
- Cross-security: another acceptable property supports the site exposure and approved costs.
- Bridging facility: short-term funding pending site sale, permit achievement or a documented construction-finance transition.
The lender may control cost drawdowns, require evidence of expenditure or retain interest. All figures should be editable and transaction-specific; no generic LVR or timeframe should be treated as an offer.
See second mortgage finance in Melbourne and how Melbourne private lenders assess deals.
What makes the site-finance exit credible?
Define the exit stage
Construction refinance, site sale, joint-venture capital, bank land refinance or another verified event.
Identify prerequisites
Permit, presales, equity, builder contract, QS report, serviceability or other conditions needed for the next facility.
Use a realistic program
Allow for planning requests, objections, authority work, valuation and lender assessment.
Calculate debt at exit
Include interest, holding costs, professional fees, taxes and a downside extension period.
Prepare a fallback
Model the property’s sale or refinance position if the intended scheme is delayed, reduced or not approved.
An exit based on construction finance should show how land debt, remaining costs, value, equity and project feasibility will meet the next lender’s requirements.
What information supports the application?
- contract, title, ownership and deposit evidence;
- current valuation and comparable evidence;
- planning-property report, zone and overlay information;
- concept plans, application, permit and endorsed plans where available;
- planning correspondence and consultant reports;
- site, environmental, geotechnical and services information;
- existing mortgage statements and formal payouts;
- development feasibility and sources-and-uses budget;
- company, trust, director and guarantor documents;
- borrower experience and consultant team; and
- primary and fallback exits.
A developer holds a Melbourne infill site during planning
Situation: An experienced developer acquires a metropolitan Melbourne infill site and intends to seek a planning permit before arranging construction finance.
Finance requirement: Complete the acquisition and fund defined planning, consultant, interest and holding costs.
Potential structure: A short-term commercial first mortgage over the site, with controlled approved-cost funding, subject to valuation, planning review, borrower assessment and lender approval.
Exit: Refinance into a construction facility after permit, builder, equity, feasibility and other conditions are satisfied, with site sale as a fallback.
This is a hypothetical illustration only, not a completed transaction or promise of approval or planning outcome.
What can weaken a site-finance proposal?
- valuing the land solely from an unapproved scheme;
- underestimating planning, authority and holding time;
- omitting tax, interest and consultant costs;
- assuming a permit automatically creates construction finance;
- ignoring contamination, access or service constraints;
- failing to disclose options, caveats or related interests;
- providing no evidence for the construction-refinance exit; or
- having no fallback if planning or market conditions change.
Melbourne development-site finance FAQs
Can a site be financed before planning approval?
Potentially. The lender may assess current land value, planning advice, borrower equity, costs, timeframe and fallback exit. Approval is not assumed.
Can private finance fund planning and consultant costs?
Potentially, where the costs are defined, supported, controlled where required and acceptable within the overall security and exit position.
Is future development value used for the loan?
A lender may consider supported future value, but current funding usually depends heavily on the property’s present status, current value, debt and stage-specific risks.
Can a second mortgage fund the site?
Potentially. Available equity, first-lender consent, priority, approved purpose, total exposure and exit all require assessment.
Can the exit be a construction loan?
Potentially, if the borrower can demonstrate a credible pathway to the next lender’s planning, equity, feasibility, builder, presale and serviceability requirements.
What if the planning application is delayed?
The borrower should update the program, costs, interest and exit. A fallback sale or refinance scenario may become important if the facility maturity approaches.
Official Victorian references
Need private finance for a Melbourne development site?
Basic Finance Loans can review the site, current value, planning position, holding budget, existing debt, borrower experience and exit to identify potential structures.
Commercial and business-purpose finance only. Information is general and does not constitute legal, planning, environmental, tax, accounting, valuation or financial advice. Finance is subject to assessment, valuation, lender criteria, documentation, acceptable security and exit.