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Development Finance

What Feasibility Is Required For Development Finance?

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Quick answer

Most lenders want to see at least

15% to 20%

Developer margin in the feasibility

  • Core feasibility sections Costs, revenue, cash flow
  • Typical contingency allowance Often 5 to 10%
  • Independent checks often used Valuer and QS
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A development finance feasibility is the lender facing financial model that shows what the project will cost, what it is expected to sell or value for, how the cash moves over time, and whether there is enough margin for the lender to support the deal.

It normally sits alongside the plans, approvals, building contract, valuation material and quantity surveyor information, and it helps the lender test whether the project is commercially realistic.

For most lenders, the feasibility is not a vague estimate. It is usually expected to be a detailed line by line budget with conservative revenue assumptions, timing assumptions, contingencies and a clear projected profit.

What does a lender feasibility usually cover?

The exact format varies between lenders and brokers, but most development finance feasibilities cover the full picture from site acquisition through to sale or refinance.

The purpose of the feasibility is to show total development cost, gross realisation, timing, funding requirement and developer profit in a way a credit team can test.

Typical inclusions in the feasibility include:

  • iconLand purchase price and acquisition costs
  • iconConstruction cost supported by contract, tender or QS based on contract or QS review
  • iconProfessional fees, consultant costs and authority charges such as architect, engineer, certifier and legal
  • iconHolding costs including interest, rates, land tax and insurance
  • iconMarketing, selling costs, GST and contingency allowances
  • iconProjected end values, sale evidence or refinance assumptions

How Development Finance Works

Lenders generally review feasibility in a sequence, not just as a single spreadsheet number.

They check whether the budget is complete, whether revenue assumptions are supportable, and whether the project still works after applying conservative credit assumptions.

Typical feasibility review stages may include:

  • 01 Acquisition and site costs reviewed
  • →
  • 02 Construction budget checked against contract or QS
  • →
  • 03 Professional fees, authority costs and contingencies tested
  • →
  • 04 Sales values or end value evidence reviewed
  • →
  • 05 Cash flow timing and interest capitalisation assessed
  • →
  • 06 Margin, exit strategy and overall funding requirement approved

Valuers, quantity surveyors and credit teams are often used to test whether the feasibility is complete, realistic and still viable if costs rise or values soften.

What numbers matter most in the feasibility

Feasibility models are usually judged on more than one metric, but these two are central:

Method 01

Gross realisation and end value evidence

Lenders test the expected sale price or completed value against market evidence and often shade optimistic assumptions.

Method 02

Interest capitalisation, holding costs and total development cost and cost to complete

The full budget needs to capture acquisition, build, soft costs, interest, selling costs, GST and contingency so the cost to complete is clear.

Target developer margin many lenders like to see 15–20%+
  • Revenue side: realistic gross realisation or end value
  • Cost side: complete budget with contingency and holding costs

A feasibility can look profitable on paper and still fail credit if key costs are missing. Interest capitalisation, selling costs, GST treatment, contingency and timing assumptions are often where weak feasibilities fall apart.

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What must be included in the feasibility?

Before approving development finance, lenders usually require a detailed feasibility that can be matched against independent evidence and project documents.

This is used to decide whether the deal is financially viable and whether there is enough margin to absorb normal development risk.

A lender ready feasibility typically includes

  • iconLand purchase price, stamp duty and acquisition costs
  • iconConstruction costs
  • iconProfessional fees
  • iconMarketing, selling costs and agent commissions
  • iconContingency allowances for cost overruns
  • iconTotal development cost
  • iconProjected sale values or completed refinance value
  • iconDeveloper margin and sensitivity to adverse changes
15 - 20 %
Many lenders want to see a margin around 15 percent to 20 percent or better, but they also want that margin to remain acceptable after conservative adjustments. A strong feasibility is not just a high projected profit. It is a believable profit built on supportable assumptions.

Evidence supporting the feasibility

For larger or higher risk developments, lenders often want the feasibility backed by independent evidence, not just developer assumptions.

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Valuation and market evidence

The projected end values in the feasibility are commonly checked against recent comparable sales, market commentary and, in many cases, an as if complete valuation.

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Quantity surveyor and build cost evidence

Lenders often want a fixed price build contract, detailed tender or QS review so the construction line in the feasibility is credible and the cost to complete can be monitored.

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Pre sales where relevant

For some apartment and multi unit projects, signed pre sales may still be required to support the revenue side of the feasibility and the proposed loan exit.

Common problems

Many development finance applications are delayed or declined because the feasibility is incomplete, overly optimistic or inconsistent with the supporting documents.

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Missing or understated project costs

A feasibility that leaves out GST, interest, authority costs, contingency or selling fees can make the project look stronger than it really is. Credit teams usually find these gaps quickly.

Possible solutions include:
  • icon Rebuild the feasibility with every direct and indirect project cost included
  • icon Match the spreadsheet to contracts, quotes, approvals and consultant advice
  • icon Allow for realistic timing and interest capitalisation
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Unsupported revenue assumptions

High end selling prices without valuation support, weak comparable sales or unrealistic refinance assumptions can undermine the entire feasibility.

Possible fixes include:
  • icon Use conservative gross realisation assumptions
  • icon Support end values with current comparable evidence
  • icon Strengthen the exit strategy with pre sales or refinance logic
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Margin too thin after lender shading

A project may show an acceptable margin initially, but once a lender applies lower end values, higher contingencies or extra interest, the margin may fall below policy.

Rescoping the project, improving procurement or contributing more equity can sometimes restore a workable margin.
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Feasibility not supported by evidence

Even experienced developers can be declined if the feasibility is not supported by a contract, tender, valuation logic, QS input, cash flow assumptions and clear exit plan.

Lenders are more comfortable when they can verify the numbers through independent documents.
  • icon Use builder, consultant and valuation evidence that matches the spreadsheet
  • icon Ensure GST, contingencies, holding costs and sales costs are clearly stated
  • icon Present a clean, lender ready feasibility with assumptions explained
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Steps To Prepare A Lender Ready Feasibility

Step

01

Confirm the project concept, product mix and likely exit strategy

Step

02

Prepare plans, approvals status and key consultant inputs

Step

03

Build a detailed feasibility covering acquisition, build, soft costs, holding costs, GST and selling costs

Step

04

Check what equity, cash contribution and contingency buffer are available

Step

05

Support the feasibility with contracts, quotes, valuation evidence, QS input and pre sales if required

Step

06

Present the package to lenders so credit can test the feasibility, margin and funding requirement

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Speak with a Development Finance Specialist

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Feasibility requirements can vary significantly depending on the project size, location, approvals, product type and the lender being targeted.

A specialist can review your feasibility, identify weak assumptions and help determine which lenders may be comfortable with the project.

Speak with a finance specialist about your feasibility and funding scenario.

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

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