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Development Finance

How Much Equity Is Required For Development Finance?

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Quick answer

Typical equity contribution

15% to 30%

Of total development cost on many projects

  • More conservative deals 20 to 35%+
  • Common funding range 60 to 75%
  • Accepted equity forms Cash, land, property equity
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For most Australian development finance deals, the borrower is expected to contribute a meaningful amount of equity rather than relying on debt for the entire project. In many cases that means around 15 to 30 percent of total development cost, although stronger or more complex deals can require more.

The exact figure depends on the lender, project type, developer experience, location, pre sales, and how conservative the feasibility looks once costs, contingency, selling costs and margin are fully tested.

Equity does not always need to be cash sitting in the bank. Depending on the structure, lenders may recognise usable equity in another property, the value already held in the development site, or a direct cash contribution as part of the borrower contribution.

What does lender equity actually mean?

In development finance, equity is the part of the project cost that the borrower funds rather than the lender. It acts as a buffer against risk and shows the developer has real capital committed to the project.

Lenders generally want to see this because development projects carry more uncertainty than standard residential lending. Costs can move, timelines can blow out, and end values can change.

Equity may be measured against:

  • iconTotal development cost
  • iconLoan to total development cost ratio
  • iconLoan to gross realisation value
  • iconCurrent site value and debt position
  • iconDeveloper liquidity after contribution
  • iconContingency and cost overrun capacity

Typical Equity Ranges

There is no single minimum that applies to every development lender.

As a broad guide, smaller or cleaner deals may work with lower equity, while larger, riskier, or less experienced deals often need a bigger contribution.

A simple way to think about it is:

  • 01 15 to 20% for some simpler smaller projects
  • →
  • 02 20 to 25% for many standard non bank deals
  • →
  • 03 25 to 35%+ for more conservative or complex projects

That equity requirement often sits alongside lender funding of roughly 60 to 75 percent of total development cost, though some structures can differ depending on lender policy and the strength of the deal.

How lenders assess the contribution

Lenders do not just ask how much equity you have. They assess where it comes from and how reliable it is.

Assessment 01

Loan to total development cost

Many lenders compare the proposed debt against total development cost. The lower the debt ratio, the more equity the borrower is contributing.

Assessment 02

Value and liquidity of the equity

Lenders also assess whether the contribution is cash, available property equity, or site value already held, and whether enough liquidity remains for overruns.

Typical borrower contribution 15 to 30%+
  • Cash contribution can strengthen lender confidence
  • Usable equity in other property may also be acceptable
  • Stronger projects may access higher leverage

In practice, the minimum equity requirement is really a combination of contribution size, project quality, and how comfortable the lender feels that the borrower can absorb unexpected setbacks.

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What can count as equity?

Not every lender treats equity the same way, but common forms of acceptable contribution include:

  • iconCash deposit contributed by the borrower
  • iconThe unimproved or current value in the development site if already owned
  • iconUsable equity released from another residential or commercial property
  • iconFunds injected by related entities or joint venture partners
  • iconOccasionally, subordinated capital depending on the lender and structure
  • iconRetained liquidity for contingencies and interest buffer
20 - 35 %
A useful rule of thumb is that many conservative lenders want to see the borrower sitting somewhere in this range once cash, usable property equity, site value, and overall project risk are taken into account.

Why more equity is sometimes required

The minimum contribution rises when the deal carries more risk or uncertainty.

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Complex project

Large apartment projects, unusual product, regional locations, or mixed use deals may need stronger equity because there is more execution and end value risk.

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Limited experience

First time developers or borrowers without a strong team may need a larger contribution to make the project bankable.

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Thin feasibility

Where profit margin is tight or contingency looks light, lenders often want more borrower capital in the deal before approving finance.

Common problems

Equity is one of the most common reasons development finance deals fall over or need to be restructured.

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Not enough usable equity

Borrowers sometimes assume gross property value equals usable equity, but existing debt and lender policy reduce what is actually available.

Possible solutions include:
  • icon Revalue supporting property
  • icon Reduce project scale
  • icon Bring in an equity partner
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Too little liquidity left over

Even if the borrower can inject enough equity, lenders may still worry if no cash buffer remains for overruns or delays.

Lenders often prefer to see:
  • icon Cash reserves after settlement
  • icon Clear contingency allowance
  • icon Sensible cost assumptions
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Equity tied up in the wrong structure

Some borrowers have wealth in trusts, companies, or related entities but not in a form the lender can readily use without extra security or guarantees.

This may require:
  • icon Additional legal structuring
  • icon Extra guarantees
  • icon A different lender appetite
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Assuming every lender is the same

Major banks, non bank lenders, and private lenders often view equity and risk very differently, so a decline with one lender does not always mean the deal is impossible.

Options may include:
  • icon Restructuring the debt stack
  • icon Using a smaller first stage
  • icon Matching the deal to a more suitable lender
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Steps To Work Out Your Equity Position

Step

01

Prepare a full feasibility including land, build, professional fees, selling costs, finance costs, and contingency

Step

02

Work out your available cash and the real usable equity in any supporting property

Step

03

Estimate the likely debt based on lender loan to cost and loan to value settings

Step

04

Check whether you still have enough liquidity left over once the equity is injected

Step

05

Identify whether a bank, non bank, private lender, or equity partner is the best fit for the risk profile

Step

06

Submit the deal with a clear explanation of your contribution, security position, and contingency buffer

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Speak with a Development Finance Specialist

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Equity requirements can vary sharply between lenders even when the same project is presented to each of them.

A specialist can review your feasibility, your available equity, and your security position to estimate which lenders may be realistic for the deal.

Speak with a finance specialist about your equity position.

Submit the short form below and a development finance specialist will review your project and discuss possible funding structures.

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