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Development Finance

What Costs Are Included In Development Projects?

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Quick answer

Development budgets usually include

7+ major cost categories

From land acquisition through to selling and finance costs

  • Core cost groups most feasibilities cover 7
  • Acquisition costs often above purchase price 5 to 8%
  • Contingency usually allowed for Yes
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Development projects involve far more than just buying land and paying a builder. A proper project budget usually includes acquisition costs, professional fees, statutory charges, finance costs, construction, contingency and sales costs.

Lenders examine these costs in detail because the total development cost shapes borrowing capacity, required equity, project feasibility and profit margin.

If costs are underestimated, the project can run short of funds even where the site and end values look strong on paper. That is why lenders want a complete, realistic and well evidenced cost schedule before approving development finance.

What costs are usually included?

A full development feasibility should capture every material cost required to acquire, deliver and exit the project.

Lenders do not look only at the build contract. They assess the entire capital stack and the complete cost to finish the project.

Typical cost categories include:

  • iconLand and acquisition costs
  • iconConstruction and civil works
  • iconProfessional and consultant fees
  • iconCouncil, authority and statutory charges
  • iconFinance, interest and holding costs
  • iconMarketing, sales and contingency allowances

How Development Costs Are Usually Grouped

Most lender feasibilities break costs into logical categories so they can test whether the total project budget is complete.

While every project is different, the cost stack often follows a predictable structure from site purchase through to final sale.

A typical sequence may include:

  • 01 Site acquisition
  • →
  • 02 Approvals and design
  • →
  • 03 Construction works
  • →
  • 04 Statutory and authority costs
  • →
  • 05 Finance and holding costs
  • →
  • 06 Sales, legal and contingency

Some of these categories are paid upfront, some accrue over time, and some are only triggered near completion. Missing even one category can distort the true feasibility of the project.

The Main Cost Buckets Lenders Focus On

When reviewing a development project, lenders usually focus on both hard costs and soft costs:

Category 01

Hard costs

Hard costs usually include site works, construction, civil works, services, landscaping and other physical build costs directly tied to delivery.

Category 02

Soft costs

Soft costs usually include acquisition expenses, consultants, approvals, finance costs, legal fees, marketing, sales commissions, GST impacts and contingency.

Typical feasibility view Full project budget
  • Acquisition costs above the land price are usually included
  • Finance, selling and contingency costs are usually included too

Marketing, agent commissions and sale related costs is not just the purchase price plus the build contract. A proper lender assessment usually includes the full list of project costs needed to take the site from acquisition to completion and exit.

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Typical Cost Items In A Development Feasibility

Before approving finance, lenders usually want a full cost schedule showing how the total development cost has been calculated.

This allows them to judge whether the budget is realistic, whether enough equity is available and whether the projected profit is strong enough.

A feasibility commonly includes:

  • iconLand purchase price plus stamp duty and legals
  • iconConstruction, site works and civil costs
  • iconArchitect, planner, engineer, surveyor and certifier fees
  • iconCouncil contributions, approvals and authority charges
  • iconInterest, lender fees, line fees and holding costs
  • iconTotal development cost
  • iconGST, tax timing and completion costs where relevant
  • iconContingency and target developer margin
15 - 20 %
A complete feasibility must include enough allowance for hidden or timing based costs. Even a well priced project can become unworkable if finance costs, authority charges, GST, selling costs or contingency have been understated.

Costs That Are Often Missed

Many projects run into trouble because smaller line items were not allowed for early enough

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Acquisition costs beyond the land price

Stamp duty, legal fees, valuation fees, due diligence costs and settlement adjustments can materially increase the actual cost of securing the site.

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Finance and holding costs

Interest, establishment fees, line fees, valuation fees, QS fees and holding costs can rise if approvals or construction take longer than expected.

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Contingency and delivery risk

Unexpected service upgrades, latent site conditions, cost escalation, weather delays and builder variations are why lenders expect a contingency allowance.

Common problems

Budgets often fail not because the site is poor, but because important development costs were missed, understated or unsupported.

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Missing acquisition and statutory costs

Developers sometimes miss stamp duty, conveyancing, due diligence and early consultant invoices when first estimating total development cost.

Helpful checks include:
  • icon Check stamp duty and acquisition costs early
  • icon Confirm authority charges and consultant scopes
  • icon Update the feasibility whenever assumptions change
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Understated construction and civil costs

Initial building estimates do not always capture demolition, remediation, services, landscaping, external works and site specific complexity.

Helpful checks include:
  • icon Obtain detailed builder and civil costings
  • icon Allow for site works and escalation
  • icon Stress test the budget for delay risk
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Finance and holding costs underestimated

Loan interest, lender fees, line fees and longer approval or construction timeframes can materially change the end feasibility.

Recalculate interest and holding costs based on realistic timeframes.
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No meaningful contingency or selling allowance

A project that carries no meaningful contingency or too little allowance for selling costs can appear far stronger than it really is.

Helpful checks include:
  • icon Include marketing, legal and sales commissions
  • icon Carry an adequate contingency allowance
  • icon Review GST and settlement timing assumptions
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Steps To Build A Proper Development Cost Budget

Step

01

Identify the site and define the intended development outcome

Step

02

List all acquisition costs including duty, legals and due diligence

Step

03

Obtain build, civil and consultant cost estimates

Step

04

Add statutory charges, finance costs, holding costs and contingency

Step

05

Model selling costs, GST impacts and projected end values

Step

06

Review the full feasibility to confirm the project remains commercially viable

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Speak with a Development Finance Specialist

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Development cost analysis can vary significantly depending on the site, build method, authority requirements, timeline and exit strategy.

A specialist can review your feasibility and help identify whether key cost items have been captured before the project goes to lenders.

Speak with a finance specialist about your development budget.

Submit the short form below and a development finance specialist will review your proposed costs and discuss possible funding options.

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Additional Questions

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