Development finance is geared toward funding new building projects or full-scale renovations. It can be used to finance the construction of new housing estates, office blocks, luxury homes, and so on. The project could be residential, commercial or mixed use. It is one of the ways of financing for development and is given as a loan from financial institutions.
The loan could be advanced to enable you to purchase the land and carry out the project construction works in their entirety. To determine the amount of loan you will receive, the financial institution will consider the gross development value (GDV) of the property. Thus, they will advance you a percentage of the GDV, which you will have to repay in stages later on.
But you don’t have to go for the full amount that the financial institution is willing to give you. If you are doing limited renovations, taking a refurbishment loan should be good enough.
Development finance is never given to you in cash. Rather, the amount of money advanced to you is used to pay the several individuals working on the project including the architects, contractors, and so on. This is done until the entire project is completed. The bank may give you a loan to cover 100 percent of the costs of only part of it.