Development finance is amongst the more complex property finance products, but there is typically more room for negotiation with the lender on the terms of the loan documentation. It is therefore critical that you have the right lawyer in your corner who can really add value by improving the terms of the loan for you.
Property development finance can provide short-term funding for either more extensive new construction projects or large renovations, helping developers to free up their personal capital for other projects or unforeseen expenses.
Loans cover both land purchase and building costs. Loan amounts are based on a percentage of the gross development value at the end of the work. Usually, development loans are drawn in stages (referred to as ‘tranches’). Part of the loan will be drawn to acquire the land, and subsequent funds drawn for the development.
Reporting to the lender
The reporting criteria to the lender are usually very strict in Development Finance to ensure that the property is being developed in accordance with a plan approved by the lender. There will virtually always be ‘step-in’ rights allowing the lender to complete any development work to ensure that their security is protected.
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