What ground-up development finance covers
Ground-up development finance funds the entire lifecycle of a new-build project:
- Land purchase: The initial advance (day-one drawdown) covers part of the land acquisition — typically up to 65–70% of the site's current value
- Construction costs: Staged drawdowns released as construction progresses through defined stages (foundations, superstructure, first fix, second fix, completion)
- Professional fees: Architect, structural engineer, and other professional costs can usually be included in the facility
- Interest: Rolled up (added to the loan balance) rather than paid monthly — so you make no payments during the build
Typical terms for ground-up finance
- Interest rate: 7–12% per annum (rolled up). Experienced developers with clean schemes achieve 7–9%; first-time developers and complex schemes pay 10–12%.
- LTC (Loan-to-Cost): 75–90% of total project costs
- LTGDV (Loan-to-GDV): 60–70% of completed value
- Arrangement fee: 1–2% of total facility
- Term: 15–24 months (matched to the build programme plus 3–6 months for sales)
- Exit fee: 0–1% (not all lenders charge this)
How drawdowns work
Unlike a standard loan where you receive all funds upfront, ground-up development finance is drawn down in stages as construction progresses. This protects the lender — they only release funds for work that's been completed.
- Day-one drawdown: Land purchase advance (typically 65–70% of site value)
- Stage 1: Foundations and substructure
- Stage 2: Frame and superstructure (walls, floors, roof)
- Stage 3: Weathertight (windows, doors, roof covering)
- Stage 4: First fix (mechanical, electrical, plumbing rough-in)
- Stage 5: Second fix (kitchens, bathrooms, electrics, finishing)
- Stage 6: Completion (external works, landscaping, snagging)
Before each drawdown, a monitoring surveyor inspects the site to verify work has been completed to the claimed stage and that costs are in line with the budget. Only after their sign-off does the lender release the next tranche.
What lenders look for
- Planning permission: Full/detailed planning consent. Outline planning is acceptable but limits lender options and may attract premium pricing.
- Borrower experience: Track record of completed schemes of similar scale. First-time developers can qualify with the right team and conservative deal structure.
- Build cost realism: Costs benchmarked against BCIS data. A QS report or detailed contractor tender strengthens the application significantly.
- GDV evidence: Comparable completed sales (not asking prices) supporting your projected values.
- Viable margins: Minimum 15–20% profit on cost. Lenders stress-test this with sensitivity analysis.
- Clear exit: A credible plan for selling units or refinancing on completion.
Ground-up vs refurbishment finance
- Programme: Ground-up typically takes 15–24 months vs 9–15 months for refurbishment
- Cost predictability: Ground-up is more predictable (no hidden structural issues) but subject to weather and ground condition risks
- Rates: Broadly similar, though straightforward ground-up schemes may achieve slightly better pricing
- Experience requirements: Some lenders have stricter experience requirements for ground-up (managing a full build is more complex than managing a refurb)
Get started
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