Development finance is a type of funding specifically designed for property developments such as duplexes, townhouses, apartments or subdivisions. Unlike a normal home loan, the lender assesses the project based on the completed value of the development (GRV – Gross Realisation Value), project feasibility, construction costs and expected profit.

Capitalised interest is one of the most powerful tools available in development finance.

Instead of making monthly loan repayments during construction, the interest is added to the loan balance and paid back at the completion of the project. This means your finance costs are effectively built into the development funding from day one.

By removing monthly repayment obligations, developers can preserve cash flow, reduce financial stress and allocate more capital towards delivering the project.

This is why most professional developers prefer capitalised interest facilities. It allows them to focus on construction, sales and project delivery rather than managing ongoing repayments throughout the build.

Property development is fundamentally different from purchasing a home or investment property.

During construction, a project typically generates no rental income while simultaneously requiring significant expenditure on consultants, approvals, infrastructure, construction and holding costs.

If a developer was required to make monthly repayments throughout the build, it would place unnecessary strain on cash flow and potentially limit the size of projects they can undertake.

Capitalised interest solves this problem by allowing interest costs to be incorporated into the funding structure. This enables developers to retain working capital, maintain project momentum and maximise their ability to complete the project successfully.

Simply put, capitalised interest allows the project to fund itself until completion.

The amount you can borrow depends on several factors, including the project's feasibility, location, construction costs, end values and your development experience.

Most development lenders assess the project using a combination of Loan-to-Cost Ratio (LTC) and Loan-to-GRV Ratio (LTGRV).

Depending on the lender and project type, funding can often cover a substantial portion of land value, construction costs, professional fees and even interest costs.

Every project is assessed individually, which is why obtaining a professional feasibility assessment is often the first step in determining borrowing capacity.

At Montoya Roe, we work with clients to structure funding solutions that maximise leverage while maintaining lender confidence and project viability.

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Many successful developments are completed by first-time developers every year.

While experience can improve funding options and lender appetite, lenders also recognise that everyone starts somewhere. The key is demonstrating that the project is feasible and surrounding yourself with the right team of professionals.

This includes experienced builders, consultants, project managers, finance specialists and planners.

The quality of the project and the strength of the team are often just as important as the developer's track record.

At Montoya Roe, we regularly assist first-time developers in understanding the process, assessing opportunities and securing suitable funding structures.

GRV stands for Gross Realisation Value.

It represents the total estimated value of a development once it has been completed and sold.

For example, if four townhouses are expected to sell for $800,000 each, the project's GRV would be $3.2 million.

GRV is one of the most important figures in development finance because lenders use it to assess project viability, determine lending limits and calculate risk exposure.

A strong GRV relative to development costs generally improves funding outcomes and increases the likelihood of project approval.

Understanding your GRV is critical because it ultimately determines whether a development is financially viable before construction begins.

The most common mistake is focusing on the property before understanding the numbers.

Many aspiring developers purchase sites based on emotion or potential without conducting a detailed feasibility assessment.

Other common mistakes include underestimating construction costs, overestimating end values, failing to account for contingencies, choosing inappropriate finance structures and not seeking professional advice early enough.

Successful developers approach every opportunity as a business decision first and a property purchase second.

The strongest projects are typically those where the feasibility, finance strategy and exit plan are thoroughly understood before any commitment is made.

At Montoya Roe, our goal is to help clients identify opportunities, understand the risks and structure projects that have the highest probability of success.