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Residential development finance funds the construction of new homes from the ground up. It covers schemes ranging from a single detached house to large multi-unit residential developments of 50 units or more.
The facility is structured as a series of staged drawdowns released against certified build progress, with interest rolled up and repaid when the completed units are sold or refinanced onto standard buy-to-let or residential mortgages.The residential development finance market in 2026 is active across London and the South East, driven by continued housing demand and a pipeline of sites with planning consent that require developer capital. At Square Gain Capital, we work with first-time developers on single-unit projects through to experienced housebuilders managing multiple concurrent schemes. We have access to specialist residential development lenders who operate exclusively through intermediaries and make lending decisions based on the project appraisal and the developer’s track record.
We arrange residential development finance for single-unit new-build houses, small blocks of flats from two to ten units, medium-sized residential schemes of 10 to 30 units, and larger housing developments above 30 units where developer experience supports the facility size. We also fund permitted development conversions from commercial to residential, house-to-flat conversions, and barn or agricultural building conversions where planning consent has been secured.
Residential development lenders use a consistent set of underwriting metrics across the market, but the specific limits and conditions applied to any given project depend on the developer’s track record, the location of the scheme, and the strength of the planning consent.
GDV is the aggregate value of all completed units valued at open market prices on practical completion. An independent RICS-qualified valuer appointed by the lender produces the GDV assessment. The valuer compares the proposed units to recent comparable sales in the same postcode area. In London and the South East, GDV assessments can vary significantly between valuers, and we help developers prepare comparable evidence that supports a realistic GDV before the formal valuation is instructed.
Senior development lenders typically advance up to 65 to 75 percent of GDV. First-time developers are generally limited to 65 to 70 percent. Experienced developers with a strong track record of similar completed schemes can access up to 75 percent. Mezzanine finance can increase effective leverage to 85 percent of GDV in some cases, though at a higher blended rate.
Most residential development lenders will advance up to 85 to 90 percent of total project costs, including land, build costs, professional fees, and finance costs. The remaining 10 to 15 percent must come from developer equity. Lenders typically require the equity to be committed upfront before the first drawdown is made, rather than contributed proportionally across the build.
Lenders categorise developers by experience: first-time, emerging (one to three completed schemes), and experienced (four or more comparable completed schemes). The category determines both the maximum LTC and the range of lenders willing to consider the application. Developers without a completed residential track record can compensate by assembling a strong build team with a verifiable track record.
Full planning permission is the strongest position. Outline planning permission is acceptable to some lenders, particularly on larger sites where reserved matters approval is expected before the build commences. Permitted development rights, including Class MA commercial-to-residential conversions, are well understood by specialist lenders and do not require the same level of planning evidence as a full application.
| Developer Profile | Max LTGDV | Max LTC | Typical Rate (p.m.) | Monitoring Surveyor |
|---|---|---|---|---|
| First-time developer | Up to 65% | Up to 75% | 0.85% – 1.10% | Required — lender appointed |
| Emerging (1–3 schemes) | Up to 70% | Up to 85% | 0.75% – 0.95% | Required — lender appointed |
| Experienced (4+ schemes) | Up to 75% | Up to 90% | 0.65% – 0.85% | Required — lender appointed |
| Joint venture with experienced partner | Up to 70% | Up to 85% | 0.75% – 0.95% | Required — lender appointed |
The maximum facility is the lower of the loan to GDV limit and the loan to cost limit applied to the specific project. For a typical residential development scheme in London in 2026, the senior debt facility covers land acquisition, the full build programme, professional fees, monitoring surveyor costs, and the arrangement fee and interest rolled up through the build period.
For a scheme with a GDV of £2,000,000 and total costs of £1,500,000, a lender advancing 70 percent of GDV would provide £1,400,000. If total costs are £1,500,000, the 90 percent LTC limit would allow £1,350,000. The lower of the two limits applies, so the facility in this example would be £1,350,000, requiring the developer to contribute £150,000 of equity.
Where the senior debt facility does not cover enough of the total project costs, a mezzanine lender can provide a second-charge loan that sits behind the senior debt and increases total leverage. Mezzanine finance typically adds 10 to 15 percent of GDV to the facility, pushing total leverage to 80 to 85 percent of GDV. Mezzanine rates are higher than senior rates, typically between 1.2 and 1.8 percent per month, reflecting the second-charge position.
Interest is calculated on the drawn balance and rolled up monthly. Because drawdowns are staged, the average drawn balance across the build period is substantially lower than the maximum facility, which means the total rolled-up interest is lower than a naive calculation based on the full facility at the headline rate would suggest. We prepare a full cash flow model for every project that shows the actual drawn balance, rolled-up interest, and total facility requirement at each stage of the build.
We review the project appraisal in detail, including the land cost, QS build cost schedule, contingency allowance, professional fees, and GDV assumption. We stress-test the numbers against current comparable sales data and identify the most likely lender range before any approach is made.
We prepare a structured information pack including a development summary, planning documents, build cost schedule from a quantity surveyor, developer track record, and supporting evidence for the GDV assumption. A thorough pack at this stage is the single biggest factor in securing competitive terms quickly.
We approach the most suitable lenders for the specific project and developer profile. Indicative terms typically come back within two to five working days. We compare the term sheets and present you with a recommendation explaining the trade-offs between different lender offers.
The chosen lender instructs an independent RICS valuer and monitoring surveyor. The valuer assesses the site value and GDV; the monitoring surveyor reviews the build cost schedule and contractor credentials. Credit approval follows once both reports are received and reviewed by the lender's credit committee.
Solicitors on both sides complete the facility agreement, legal charge, and any additional security documentation. The first drawdown covering land acquisition is released on legal completion. Subsequent drawdowns are released against monitoring surveyor certifications at each agreed build stage.
Residential development projects involve more moving parts than a standard mortgage application. Here are some of the situations our advisers help developers work through.
First-time residential developers can access funding, but the approach needs to be tailored. Choosing a lender that specialises in emerging developers, assembling a credentialed build team including an experienced contractor and architect, and starting with a project whose GDV and LTC ratios are comfortably within first-time developer limits are the three factors that make the difference between approval and decline.
A GDV that falls short of expectations changes the loan calculation but does not necessarily make the project unviable. We look at whether the GDV is genuinely conservative or whether additional comparable evidence would support a stronger valuation, and whether adjusting the scheme design, reducing costs, or introducing mezzanine finance can restore the project’s viability at the lower GDV figure.
Development facilities can be extended, though extension fees and sometimes a re-valuation are required. We engage with the lender as soon as a programme delay becomes apparent, before the situation becomes critical. Where the existing lender cannot accommodate an extension on reasonable terms, we identify alternative lenders who can refinance the facility and fund completion of the remaining works.
Many residential development sites are acquired at auction where 28-day completion is standard. We can arrange a bridging loan to complete the purchase quickly and then refinance onto a development facility once the full lender due diligence process is complete. The bridging loan can typically be arranged in five to ten working days for a straightforward site.
Permitted development conversions from office, retail, or other commercial uses to residential are well established in law and well understood by specialist development lenders. The key is identifying lenders with an active appetite for PD schemes rather than those who will apply full planning criteria to a PD conversion and then decline because the application does not meet their residential new build criteria.
Speak to an adviser to discuss your circumstances and find out how we can help.
Clear,honest answers to the questions we hear most from clients and introducers.
Minimum facility sizes vary by lender but most residential development lenders start at £150,000. Some specialist lenders focus on smaller schemes of £150,000 to £1,000,000; others are set up for larger schemes above £2,000,000. Maximum facility sizes for a single project range from £5,000,000 to over £50,000,000 for institutional development lenders. We match the project size to the lenders best suited to that range.
Not typically. The facility covers a percentage of total costs including land, but the developer is expected to contribute equity. The equity requirement is usually 10 to 25 percent of total project costs depending on developer experience and project profile. Mezzanine finance can reduce the cash equity requirement in some cases.
Yes, for all schemes above very small single-unit projects. Lenders require a cost schedule from a qualified quantity surveyor before formal credit can be approved. The monitoring surveyor also uses the QS schedule as the basis for certifying drawdown stages. A credible QS schedule prepared at the outset saves time during lender due diligence and reduces the risk of drawdown delays during the build.
At each agreed build stage, the monitoring surveyor inspects the site and certifies the percentage of works completed. The lender receives the report and releases the next drawdown tranche, typically within five to ten working days. We help developers plan their cash flow around expected drawdown timing to avoid liquidity gaps during the build.
Most development finance facilities allow for extensions if the build completes on time but sales are slow. Some lenders offer a sell-out period of three to six months after practical completion before requiring full repayment. Where sales are delayed beyond the facility term, refinancing the completed stock onto a BTL or commercial mortgage to repay the development facility is the most common solution.
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