Quick answer: There is no universal developer-equity percentage. The required contribution depends on the lender’s accepted land value, existing debt, total development cost, GRV, project type, experience, presales, builder risk and the lender’s maximum exposure. Unencumbered land value can form part of the equity in some structures.
Developer equity should be calculated as a funding stack, not guessed as a percentage. The borrower needs enough committed capital to get from land settlement through cost overruns and the final draw without creating a funding gap.
Have a site and feasibility? Request a development-finance assessment before committing the last of the equity to land or early works.
Worked example: land equity is useful, but it is not the whole project contribution
Illustrative only; lender ratios vary.
| Item | Illustration |
|---|---|
| Accepted land value | $1,000,000 |
| Debt secured against land | $300,000 |
| Starting land equity | $700,000 |
| Total development cost excluding land | $2,500,000 |
| Senior facility | Depends on lender assessment |
| Other cash requirement | Costs not funded, interest/fees treatment, contingency and any lender shortfall |
Start with net land equity
Use the lender’s accepted value less secured debt, not simply the original purchase price. If the valuation is lower than expected, the equity position can shrink before construction begins.
Then test LTC, LVR and GRV constraints
Development lenders can limit exposure using more than one measure. The binding constraint may be total development cost, end value, land value, presales or a dollar cap. Do not size the facility from one ratio alone.
Equity must survive the full project
Early site costs, authority charges, GST timing, QS differences, variations and interest can consume cash before the project reaches later draws. Keep a contingency rather than contributing every available dollar upfront.
Experience and exit strategy can change the structure
A first-time developer, a presale-dependent project and a build-to-hold strategy can each require different evidence and risk mitigants.
What to do next
Send the feasibility, land position and required facility for an initial development-finance review.
Frequently asked questions
Does land I already own count as developer equity?
It can. The starting point is usually the lender’s accepted land value less debt secured against it.
Is there one minimum equity percentage for development finance?
No. Requirements vary by lender, project, leverage measure and risk profile.
Can all interest be capitalised?
Some facilities allow interest to be capitalised within the approved limit, but that uses part of the facility and must be included in the feasibility.
What should I provide first?
Site details, current debt, feasibility, plans/approvals status, build cost, builder information and the proposed exit.
Sources and verification
Related GPS Finance guides
General information only. Business and commercial lending policy, pricing, security, guarantees, documentation and approval vary by lender and transaction. Examples are illustrative and are not credit, legal, tax or accounting advice.
Need help matching this to a business-finance option?
GPS Finance can review the funding purpose, conduct, documents and lender fit before you make a formal enquiry.
