Development finance for small projects: townhouses, duplexes and small subdivisions

Last updated 6 November 2026 · Reviewed by 360 MMS Compliance

What is development finance?

Development finance is a business-purpose loan for building or subdividing property to sell or hold as an investment. Unlike a home loan, it's assessed on the project as much as on the borrower: what's being built, what it will cost, who is building it, what it should be worth when it's finished and how the loan will be repaid.

Development finance is separate from a home loan or a standard business loan. For example, some 360 MMS business-purpose loans secured by residential property can be used to buy a business, subject to the lender's criteria, but they can't be used for a property development. Development projects go to 360 Private.

What stages of a small project can be financed?

• Pre-development: finance for land and sites being prepared for development, including subdivisions, while plans and approvals are worked through.
• Construction: finance for the build itself, such as townhouses, a duplex or a small block of units, with funds released in stages as the build progresses.
• Residual stock: finance for completed homes or units that need more time to sell, so the construction loan can be repaid while sales continue.

Not every project needs all three. Some developers buy a site that already has approvals, and some sell everything before completion.

How are funds released during the build?

Construction funds are drawn down in stages rather than paid out on day one. As each stage is completed, the builder claims payment and funds are released from the loan. The loan balance grows as the project goes on, and interest is charged on what has been drawn. Development loans are usually interest-only or have capitalised interest. Capitalised interest is added to the loan and repaid at the end, which increases the total cost.

What does the lender look at?

For development, the lender reviews the project before making an offer. Expect questions about:

• The site: where it is, what it's zoned for and what it's worth now.
• Plans and approvals: what has been approved, and what's still to come.
• The builder and project team: who is building, on what contract, and who is managing the project.
• The budget: the full cost of the build, fees and contingencies.
• The expected end value: what the finished property should be worth or sell for.
• The exit: how the loan will be repaid, by selling or refinancing.

The lender will assess your application against its criteria, and a valuation is part of the process.

Can a first-time developer get development finance?

Sometimes. Lenders generally prefer borrowers with development experience, but some projects from first-time developers can be considered with the right builder, project team and plan in place. A small, well-documented project, an experienced builder on a clear contract and a realistic budget help show that the project can be delivered.

What does development finance cost?

Development finance usually costs more than a standard property loan, because the lender is funding a project that hasn't been built yet. Costs to ask about include interest (often capitalised, so the balance grows), establishment and valuation fees, legal costs and any costs if the project runs late. Each loan is quoted individually, and fees and charges apply.

Tax matters too. Subdividing or developing property can have GST, capital gains tax or income tax consequences, depending on your situation. Talk to your accountant before you commit.

What are the pros and cons of development finance?

Possible pros:

• It can fund the site, the build and unsold stock as separate stages of one project.
• Funds are released as the build progresses, so interest is charged on what has been drawn.
• Interest-only or capitalised interest can ease cash flow until the project is sold or refinanced.
• Some projects from first-time developers can be considered.

Possible cons:

• It generally costs more than a standard property loan.
• Capitalised interest grows the balance, and delays add to the cost.
• Building costs, approvals and sale prices can all differ from the plan.
• The National Credit Code doesn't apply, so independent legal and financial advice matters.

How do I apply for development finance, step by step?

1. Talk to your broker or our team. Describe the project, the site and your experience.
2. Share the details. The property, plans and approvals, the builder and contract, the budget, the timeline and how the loan will be repaid.
3. Get a quote. The structure is talked through and the loan is quoted individually.
4. The assessment. The lender reviews the project against its criteria, and a valuation is part of the process. Every borrower signs a business purpose declaration.
5. The offer. If the loan is approved, you receive a loan offer and documents. Get independent legal and financial advice before you sign.
6. Settlement and drawdowns. The loan settles, and funds are released in stages as the build progresses.

How can 360 Private help?

360 MMS is a mortgage manager, and 360 Private is its specialist private lending offer, for business purposes or non-residential investment only. For a small development, we can help with:

• Residential projects: townhouses, duplexes, small blocks of units and small subdivisions.
• Commercial and mixed-use projects: commercial development finance for business purposes.
• Every stage: land and sites, construction and residual stock.
• First-time developers: some projects can be considered, with the right builder, project team and plan.
• A quote: each loan is quoted individually, based on the project, the borrowers and the exit.
• Getting started: apply through your broker, or share the project details with our team directly.

FAQs

Sources and further reading:Moneysmart: Property development · ATO: Vacant land and subdividing · ASIC: National Credit Code

General information only. It doesn't take into account your objectives, financial situation or needs, and it isn't credit, tax or legal advice. 360 Private loans are for business purposes only, aren't regulated by the National Credit Code, and are subject to lending criteria; fees and charges apply. Kuone Pty Ltd T/As 360 MMS (ABN 81 621 683 672), Australian Credit Licence 504193.