Land bank loan while a DA is pending

The situation

The following is an anonymised composite reflecting a recurring pattern, not a specific settled deal. A developer secures a well-located site with strong subdivision or development potential, but the site is not yet approved for the intended use, and a development approval application has just been lodged with council. The developer needs to hold the site through what is expected to be a twelve to eighteen month approvals process before construction finance can be arranged.

Why it's hard

The site's value today, unapproved, is meaningfully lower than its value once a DA is secured, and most construction lenders are not set up to fund a holding period with no building activity and no income. The developer also needs the holding cost structured so it does not need to be serviced from other cash flow for what could be well over a year.

How it can be structured

A land bank loan secured by a first mortgage over the site, with interest capitalised through the term, is the standard structure, sized against the site's current, unapproved value rather than its potential post-approval value; the exit is either construction finance drawn once the DA is secured, or a sale of the approved site to another developer if the original plan changes. Lenders will typically want a planning consultant's assessment of the likely approval timeline and any anticipated conditions, since the credibility of the planning pathway is central to the facility's own risk. Where the approvals process runs longer than expected, borrowers should engage with their lender well before the facility's maturity to discuss an extension, rather than waiting until the term has expired.

Lenders active in this space will typically request the planning consultant's own assessment of comparable approvals in the same council area, since a track record of similar applications being approved on reasonable timeframes gives more confidence than the developer's own estimate alone. Where the DA carries any risk of a third-party objection or referral to a planning tribunal, this should be flagged upfront rather than discovered mid-facility, since it can extend the expected timeline considerably and affect how the loan's term and any extension options are structured from the outset. Some land bank facilities are structured with a series of shorter terms and formal review points, rather than one long fixed term, giving the lender an opportunity to reassess the planning position periodically without requiring a full refinance at each stage. Developers holding several sites at different points in the approvals process sometimes find it more efficient to negotiate a single facility across the portfolio rather than a separate land bank loan for each site individually.

What it typically costs

Land bank loans are priced against the uncertainty of the approvals timeline and the site's current value, quoted on enquiry once a lender has reviewed the planning application and consultant's assessment. Costs typically include an establishment fee, with interest capitalised onto the loan balance rather than serviced in cash through the term.

Timeline

1. Same day — scoping call confirming the site, the DA application status and expected timeline.
2. 5–10 business days — planning consultant assessment review and lender matching.
3. 10–15 business days — credit approval and offer.
4. 5–10 business days — settlement.

Questions we'd ask you

1. What is the expected timeline to development approval, and has a planning consultant assessed it?
2. What is the site's current, unapproved value versus its estimated value once approved?
3. What is your plan if the DA is delayed beyond the facility's initial term?
4. Do you intend to construct the project yourself once approved, or sell the approved site?
5. What equity are you contributing toward the site's holding costs?

Related

Land bank loans · Property developers · Development approval · Englobo land