Finance is one of the most critical components of any development. A project that appears profitable on paper may not proceed if it does not meet lending requirements.

Many first-time developers assume that if a site is feasible and construction costs are clear, finance will follow. In reality, lenders assess risk in far more detail. Understanding what banks and non-bank lenders look for can significantly improve approval outcomes and reduce delays.

Here are the key factors that influence development finance in Melbourne.

1. Developer experience and track record

One of the first things lenders assess is the developer’s experience.

This does not mean that new developers cannot secure finance. However, lenders will typically require:

• Additional equity
• Lower loan-to-value ratios
• Strong professional teams
• Conservative feasibility

Experience reduces perceived risk. Developers who have successfully delivered similar projects are seen as more capable of managing timeframes, costs, and unexpected challenges.

For first-time developers, partnering with experienced consultants and builders can strengthen confidence and improve approval outcomes.

2. Site quality and location

Lenders prioritise projects in areas with strong and stable demand.

They assess:

• Suburb performance
• Comparable sales
• Buyer demand
• Local supply
• Liquidity

Well-located sites with broad buyer appeal are considered lower risk. Projects in oversupplied or uncertain markets may require more conservative lending conditions.

This is why site selection plays such an important role not only in profitability but also in access to finance.

3. Realistic feasibility and profit margins

Banks focus on downside protection.

They expect feasibility models to include:

• Conservative sales assumptions
• Realistic construction costs
• Contingency allowances
• Clear holding costs
• Sensitivity analysis

Many lenders require minimum profit margins to provide a buffer against market fluctuations.

Projects with tight margins are more likely to be declined or require additional equity.

Developers who demonstrate disciplined feasibility are more likely to secure funding and better terms.

4. Construction cost certainty

Lenders seek clarity around construction risk.

They often require:

• Detailed cost estimates
• Fixed or structured building contracts
• Transparent scopes
• Contingency allowances

Uncertainty in pricing increases risk. Builders who provide realistic and structured cost frameworks help support stronger finance outcomes.

Early builder involvement can also reduce lender concerns.

5. Pre-sales and exit strategy

For larger townhouse and multi-unit projects, lenders may require pre-sales before funding.

This provides confidence that the market will absorb the completed dwellings.

However, requirements vary depending on:

• Project size
• Developer experience
• Location
• Lending institution

Some projects may proceed without pre-sales if other risk factors are strong.

Developers should also demonstrate flexibility in their exit strategy, including:

• Selling
• Holding
• Renting
• Refinancing

This resilience improves lender confidence.

6. Cash flow and contingency buffers

Lenders expect developers to maintain buffers.

This includes:

• Interest reserves
• Unexpected cost allowances
• Extended timelines

Projects without sufficient contingency are more vulnerable to delays or cost increases.

Strong financial planning and conservative assumptions reduce risk for both lenders and developers.

7. Professional team and project structure

The strength of the development team is a major factor in lending decisions.

This includes:

• Planner
• Architect
• Builder
• Quantity surveyor
• Project manager

Experienced teams reduce uncertainty and improve the likelihood of successful delivery.

Lenders often view the builder as one of the most important risk mitigators.

A strategic approach to finance

The most successful developers view finance as part of feasibility, not a separate step.

Understanding lender expectations early allows projects to be structured in a way that improves approval outcomes and protects profitability.

At Delcon, we work with developers during feasibility to align cost, risk, and delivery with finance requirements. This creates greater clarity and reduces delays across the project lifecycle.

If you are planning a townhouse or multi-unit project in Melbourne, taking the time to understand what lenders look for before purchasing a site can significantly improve both confidence and outcomes.

If you’re interested in getting started with a property development project in Melbourne, delcon design and construct are local Melbourne builders. We have over a decade of experience designing, building and managing multi-unit development projects. At delcon, we’re passionate about helping others achieve development success. If you have any questions relating to a potential or proposed multi-unit development in Melbourne, give us a call today on 1800 335 226.