Development land finance
Development land finance funds land that may be developed now or later. Lenders assess planning status, site value, access, services, title, borrower experience, exit route and whether the land is bare, consented, strategic or ready for development.
Financing land purchases for development projects
Land finance bridges the gap between identifying a site and having planning permission and development funding in place. Understanding the different finance options and what lenders look for helps developers make more informed decisions about land acquisition.
Land with planning
Land with full or outline planning permission is generally easier to finance because the development potential is established. Lenders can assess GDV, costs and exit more confidently. LTV and rates are typically more favourable than for land without consent.
Land without planning
Land without planning permission is more speculative from a lending perspective. Finance options may be limited to specialist bridging at lower LTV with higher rates. The exit must be credible: obtaining planning and selling, or obtaining planning and transitioning to development finance.
Strategic land
Strategic land is held in anticipation of future planning allocation. It may not have current development potential but could gain value through local plan changes or planning policy shifts. Finance for strategic land is very specialist and typically requires significant borrower equity.
Bridging finance for land
Bridging finance can fund land purchases quickly, including at auction. Terms are typically shorter (6 to 18 months) with the exit being planning permission, sale, or transition to development finance. LTV on land is usually lower than for developed property.
Development finance after planning
Once planning permission is obtained, land owners can transition from bridging to development finance. The development facility covers the land value (often included as equity) plus build costs, with staged drawdowns as construction progresses.
LTV and valuation
Land valuation depends on planning status. Bare land is valued on current use or hope value; consented land is valued reflecting the development potential. LTV for land finance typically ranges from 50% to 65% depending on planning status and lender appetite.
Exit by sale, planning uplift or development
Common exits for land finance include: selling the land with planning permission, beginning development and transitioning to development finance, or refinancing onto a longer-term facility. The exit must be achievable within the loan term.
FREQUENTLY ASKED
Frequently asked questions
Sometimes, but lender choice and LTV are usually more limited than for consented land.
Not always. Land finance may be used before development finance if planning, costs and GDV are not ready.
Possibly, but lenders will want a credible route to planning uplift, sale or refinance.
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Results are indicative and depend on lender criteria, valuation, security, credit profile, exit route and full underwriting.
Results are indicative and depend on lender criteria, valuation, security, credit profile, exit route and full underwriting. Commercial finance may be unregulated. Some property finance can be regulated depending on borrower, property use and loan purpose.