Property Development Finance: What Is It For?

Property development finance is usually provided with different conditions from those that accompany standard mortgages. Just what the conditions will be, partly depends on what you want the property development finance for.

There are all sorts of projects that might attract property development finance. They range from small individual projects to huge corporate ones.
• Residential development. An individual might be looking for property development finance for a private project.
o You could have bought an old house and want to refurbish it, or want to build an extension on your current home.
o You may be planning a conversion – perhaps converting an old barn into a residential property.
o Perhaps you have purchased a piece of land and have planning permission for a self-build project for a home for yourself and your family.
• Commercial development. On a bigger scale finance could be required for a development for profit rather than just for residential purposes.
o You or your company may have acquired or inherited a piece of land with planning permission for a larger development of a number of residential properties.
o You may be a developer who is actually in business to acquire land for new build purposes.
o Finance may be required for commercial properties – from renovation of high street retail units or restaurants, up to the developing of a whole new shopping mall.
o Alternatively, finance may be required for the conversion of a former large residential property into a hotel.
• Property trading. Property development finance can be applied for buying a property and doing it up specifically for resale. Specific types of security may be required for this sort of transaction – for example, securing against another property owned by the applicant.
• Planning gain finance. People sometimes apply for funding to to buy sites that are potentially lucrative, but on which planning permission has not yet been obtained. The prospective purchaser might be looking to develop on the site, or possibly just to re-sell the site at a quick profit after planning permission is obtained. Obviously this is speculative and both parties are taking a gamble. The rates on the loan will reflect the level of risk – i.e. how likely it is that planning permission will be obtained.

These are just some of the purposes for which property development finance might be required. They can range from a modest idea by a private individual, to a multi-million project for a large company. Whatever the size of your project, there will be a property development finance lender who will consider it – ask a broker who will help you find the right one.

Sean Horton is a Director of Enhanced Wealth Limited who offer a specialist service for property development finance