Property development finance is a flexible way of financing the development of commercial and residential properties for onward sale to third parties or heavy refurbishment of existing properties. Typically, a deal can be financed if the business can inject the funds to purchase the land, with finance available up to 85% of overall costs -normally capped out at 65-75% of Gross Development Value (GDV).
Topics: Property Development Finance
Under UK law, property can be acquired as either freehold or leasehold and there are important differences to note between the two.
Houses are usually sold freehold, although leasehold houses are becoming more common in new build developments. Flats and office space are sold leasehold, as portions of a larger building. Commercial property is typically sold leasehold, unless you purchase an entire building. Purchasers intending to use a residential property for a commercial use may need to apply for change of use. It is important to note that leases running seven years or more need to be registered by the purchaser at the Land Registry and SDLT is payable.
Property development finance is a type of working capital finance used for large scale property development projects. The nature of development is capital intensive and can be seen as risky. The cost of finance reflects the level of risk associated with the project as assessed by the lender.