As a general guide in the current market, banks typically max out at 75 to 80% of total development cost (TDC) or 60 to 65% of gross realisation value (GRV), whichever is the lesser; non-bank and private senior lenders commonly fund 65 to 75% of GRV (excluding GST) and sometimes as high as 80%. Adding mezzanine debt or preferred equity can lift total funding to around 85 to 90% or more of TDC. The exact figure depends on your project, your track record and market conditions at the time.
The two gearing lenses: GRV and TDC
Lenders size a development loan against two numbers, and the lower of the two usually sets the limit.
GRV is the gross realisation value: the total assessed “on completion” value of the finished project, usually assessed net of GST for lending purposes.
TDC is the total development cost: land and acquisition costs, construction and contingency, professional fees, statutory costs and government fees or contributions, marketing and finance costs.
A lender will calculate the maximum loan amount under each lens and lend to whichever produces the lower figure. Understanding both lets you work out your likely borrowing capacity and, just as importantly, the equity gap you need to fill.
A worked example
Consider a townhouse project as an example:
- Land: $2.0M
- Construction: $4.5M
- Professional fees, statutory costs, finance costs and contingency: $1.5M
- Total development cost (TDC): $8.0M
- Expected end value on completion (GRV, net of GST): $9.5M
Now apply the two gearing lenses.
Under the GRV lens: senior debt at 65 to 75% of GRV gives a loan of between $6.17M and $7.12M.
Under the TDC lens: senior debt at around 80% of TDC gives a loan of roughly $6.4M.
In this example, a bank typically has a hard limit of 80% of TDC or 65% of GRV, so the bank would be limited by the 65% of GRV = max lending of $6.17M, equivalent to 77.1% of TDC.
If a non-bank lender was willing to lend, for example, 70% of GRV ($6.65M) or 80% of TDC (whichever is the lesser), then the TDC leverage would top the loan out at $6.4M.
Let’s say the developer wants to use a bank, so with max lending of $6.17M against a TDC of $8.0M, they’ll need equity of $1.83M.
Closing the gap with Mezzanine Debt or Preferred Equity
If the developer does not want to tie up the full $1.83M in cash (which FYI can also be sought from leveraging other assets), a second layer in the capital stack can help. Mezzanine debt or preferred equity might lift total funding to around 85 to 90% of TDC, or roughly $6.8M to $7.2M on this project.
Keep in mind however, that with mezz at least, that doesn’t totally come off the equity contribution, because the gearing and facility limit of the mezz is inclusive of interest capitalisation, which means that the funds advanced on day 1 are less than the facility limit, by the amount of the interest budget.
Can you reach 100% of TDC? Lenders almost always want the sponsor to have some “hurt money” in a project, so be wary of anyone advertising 100% debt funding. That said, STAC Capital has achieved funding of 99 to 100 per cent of TDC on projects for well-experienced sponsors with healthy financial positions, typically where a site was contracted with time to settle and value was added before drawdown, thereby creating “site value uplift” as effective equity contribution. These are exceptions built on strong feasibilities, not the norm.
What moves the number up or down
Two projects with the same GRV and TDC can attract different maximum funding amounts. The main factors include…
Pre-sales. Contracted pre-sales lower a lender’s risk and can lift gearing. Banks usually require a level of debt cover from qualifying pre-sales, while non-bank and private lenders may fund with limited or nil pre-sales where the project stacks up. Throughout 2025-26, STAC Capital arranged many stretch-senior construction loans up to $25M at up to 75 per cent of GRV with nil pre-sales, and up to 80% with pre-sales in place.
Experience. A sponsor with numerous completed projects of similar scale is viewed as lower risk than a first-timer, which supports higher gearing.
Location. Depth of buyer demand and market liquidity in the suburb affect how comfortable a lender is with the exit.
Feasibility strength. A well-built feasibility with a healthy profit margin, realistic costs and GRV, gives a lender room for comfort.
Product depth. Genuine, broad demand for the finished product, rather than a niche design that suits few buyers, supports a higher loan.
How Non-Bank and Mezzanine finance lift total funding
Banks offer the cheapest senior debt but cap gearing conservatively and lean heavily on pre-sales. If you need more funding than a bank will provide, or you need to move faster, non-bank and private lenders generally allow higher gearing and quicker decisions at a higher rate and fee.
Layering mezzanine debt or preferred equity on top of senior debt (whether bank or private) is how many developers close the equity gap and use less of their own cash. The blended cost rises, but the ability to proceed sooner, or to make greater overall profits by running more than one project at once, can more than justify the additional cost. The right structure is the one that produces the best outcome across the whole deal – and pipeline – not simply the lowest headline rate.
How STAC Capital helps
STAC Capital runs the borrowing-capacity question across more than 400 lenders and capital sources rather than a single bank or non-bank lender. That means sizing the stack correctly, testing it against both the GRV and TDC lenses, considering pre-sale hurdles as well as other “soft factors”, then taking it to the lenders most likely to fund it. We have settled more than $2bn and we structure the full capital stack, from senior debt through to joint venture equity.
If you want to know how much you can borrow for a specific site or project, talk to STAC Capital.
Frequently asked questions
How much can I borrow for a property development?
Senior debt commonly reaches anywhere from 60 to 80% of GRV depending on the lender type, with mezzanine or preferred equity lifting total funding further again. The lower of the GRV and TDC calculations usually sets the limit, and the figure varies by project, sponsor and market conditions at the time.
Is development finance based on the end value or the cost?
Both. Lenders calculate a maximum loan against GRV (the end value) and against TDC (the cost), then lend to whichever produces the lower amount.
Can I develop with no money down?
Rarely, but it does happen. Lenders almost always want the sponsor to have some “hurt money” in the project, but funding of 99 to 100 per cent of TDC is possible in select cases through a combined debt and equity structure for a well-experienced sponsor with a healthy financial position and a strong feasibility. Most projects require the developer to contribute meaningful equity.
Do pre-sales increase how much I can borrow?
They can. Contracted pre-sales reduce a lender’s risk and can support higher gearing. Banks usually require substantial pre-sale cover, but they do have hard limits on gearing. Non-bank and private lenders may fund with limited or nil pre-sales where the project is strong, they often have greater flexibility in relation to gearing limits, and may leverage higher with more pre-sales.
What is the difference between senior debt and mezzanine finance?
Senior debt is the largest, cheapest layer and sits in first-ranking position. Mezzanine debt sits behind it in second position, fills the gap between senior funding and the developer’s equity, and carries a higher cost because it takes more risk.
Why does the lender use the lower of the GRV and TDC figures?
It is a risk control. Gearing against the end value protects the lender if costs run over, while gearing against cost protects against an optimistic end value. Taking the lower of the two keeps the loan supportable under both tests.
This article is general information only and does not constitute financial, legal or tax advice. Figures are indicative, vary by lender, project and market conditions, and are current at the time of writing. Finance is subject to lender approval, terms and conditions. STAC Capital Pty Ltd holds Australian Credit Licence 520267. STAC Capital Advisory Services Pty Ltd holds Australian Financial Services Licence 523025.
