A property development loan is a type of financing used to fund the construction or renovation of residential, commercial, or mixed-use properties. These loans are typically short-term and cover costs such as land acquisition, construction, labor, materials, and other development expenses.

These loans are crucial for developers who need substantial capital to bring their projects to fruition, allowing them to manage cash flow and complete construction before securing long-term financing or selling the property.

Key features of property development loans include:

• Short-term Duration: Usually lasting from a few months to 2-3 years, depending on the project’s scope.
• Interest Rates: Often higher than traditional mortgages due to the higher risk associated with property development.
• Drawdown Facility: Funds are released in stages (drawdowns) as the development progresses and certain milestones are met which is confirmed by a quantitative surveyor appointed by the bank/lender.
• Security: The property being developed usually serves as collateral, along with potentially other assets.
• Repayment Structure: Typically, interest-only payments are made during the development phase, with the principal repaid upon project completion or through refinancing or sale of the property.