Finance question
Can I get construction finance for a townhouse development?
Yes, for a project with approved plans, a fixed price builder and equity of your own. Non-bank lenders publish gearing of up to 70% of end value and often accept 0% to 50% presales, where banks commonly want presales of 70% to 100% of the debt. Subject to lender assessment.
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The short answer
Townhouses fund well when the equity and the exit are clear
A townhouse build is the most common size of development loan. The lenders that publish their limits give a clear picture: La Trobe and Assetline both state up to 70% of end value, La Trobe lends on multi-dwelling projects from $100,000 and Assetline funds 1 to 2 dwellings from $1m to $3m. Terms run up to 24 or 36 months, usually with progressive drawdowns, and interest is normally capitalised, so there are no repayments during the build (construction finance guide).
The real fork is presales. Banks commonly want qualifying presales of 70% to 100% of the debt, and the same guide notes one source putting the current norm at 100% to 120% cover. Non-banks accept 0% to 50%. APRA wrote on 13 February 2025 that a 100% presale hurdle was industry practice, not an APRA minimum, and consulted on 29 June 2026 on halving the qualifying threshold to 50%. That is a proposal only, so bank policy has not changed. Without presales you are in non-bank territory, which costs more.
Your cash is usually the binding limit. Lenders commonly look for 20% to 35% of cost as equity, and lenders may discount end value by 10% to 20% when they test it. They also look for a minimum return on cost of 15% to 20%, tested against a 10% cost rise, a 10% fall in sale prices and a six month delay. Ventas is a broker across 40+ lenders, paid by the lender on settlement, with no upfront fee to you.
Do you qualify?
What lenders test on a townhouse project.
Approvals and contract
Planning approval, engineering and a fixed price building contract.
Equity before the first draw
Land, duty and costs paid by you, commonly 20% to 35% of cost.
A proven builder
Licensed, insured, with a payment schedule that matches the draws.
A margin and an exit
Return on cost that survives a fall, plus presales or sale evidence.
Why townhouse projects get funded
Capitalised interest
No repayments during the build, the facility carries the interest.
Staged drawdowns
Residential loans commonly pay out in five or six stages.
Presales are optional at non-banks
A lender with 0% to 50% presales is not closed to you.
A worked example
Six townhouses with a total development cost of $3.2m: land and costs of $960,000 paid by you, a non-bank facility covering the build at 70% of cost, about $2.24m at peak. With an expected sale price of $4m excluding GST, the loan is about 56% of end value and the return on cost is about 25%, above the 15% to 20% lenders test for. Illustrative only.
Common questions
Frequently asked questions
Do I need presales for a townhouse loan?
Banks commonly want presales of 70% to 100% of the debt. Non-banks publish 0% to 50%, at a higher cost. Your presale position decides which lenders are open to you.
How much equity do I need?
Commonly 20% to 35% of total development cost, and the lender's valuation of the end product is sometimes discounted by 10% to 20% when it tests the loan.
Will I make repayments during construction?
Usually not. Interest is commonly capitalised, meaning it is added to the loan and repaid at sale, which also means the facility must be big enough to carry it.
How long can the loan run?
Published terms are up to 24 months for 1 to 2 dwellings at Assetline and up to 3 years at La Trobe. Delays are costly because interest keeps accruing at peak debt.