How to use pre-sales to complete your property development

According to a recent property development trends report, the pandemic has intensified the top challenges facing property developers. Around 70% of development executives said that project cost escalation is a significant challenge facing developments, followed by environmental regulations, government policies and processes, and labour safety challenges.
An increasing number of property developers are shelving projects because they can’t raise funds through traditional means. But have you explored all your options before stopping your project?
Major banks funded a significant level of property developments primarily in the past but have significantly tightened their property development finance lending terms. Now, instead of asking for 50-60% debt in presales for property development, they’re asking for up to 120% in presales in some cases, with some banks even steering away from developmental projects in their entirety for the time being.
A presale is when a purchaser buys an apartment or house off-plan (i.e. based on the development plans) for a proposed development. They are usually required to pay a deposit to secure a future sale. When the developer approaches their lender with presales it provides a certain amount of confidence that they will be able to sell the development and the individual units when it’s completed. In turn, this equates to less risk and exposure for the lender.
CorpFin provides property developers with a construction development loan package to begin, construct and complete small, medium and large development projects. Where the project viability is shown and approvals have been received, positive pre-sales may attract a more favorable combination of terms and interest.
Each development finance facility application is assessed on its merits and the CorpFin development finance team is innovative in developing deals that work for both the developer and the investors.
CorpFin finances commercial building developments and renovations that are either completed or nearing completion. The developer may have pre-sold units and require access to capital until the transfer of the units has been finalised or needs to occupy the building and requires funding to complete the development. Loans of this nature are usually replaced with long-term finance procured from traditional finance institutions and facilitated by CorpFin.