Ground Up Development Finance

What is ground up development finance?

Ground up development finance is short-term funding for a scheme built from a cleared or vacant site, from the foundations upwards, released in stages against the monitoring surveyor's certificates and repaid from the sale or refinance of the finished buildings. It is the most fully staged form of development finance: a land advance on day one, then drawdowns that follow the build programme through groundworks, superstructure, first fix and second fix to completion. Interest is usually rolled up into the facility rather than paid monthly, and the facility is sized against both the finished scheme's gross development value (GDV) and its total cost.

Lending to a company or investor for a ground-up scheme is unregulated business finance. A new home the borrower will live in is regulated self-build lending under the Financial Conduct Authority's MCOB rules, covered on self-build mortgage lenders. New building is still the main source of new homes: England added 190,600 new-build dwellings in 2024 to 2025, out of 208,600 net additional dwellings (MHCLG accredited official statistics).

Ground up development finance rates

Ground up development finance is priced through interest and fees. Interest is charged on the drawn balance and rolled up or retained. The fees are an arrangement fee on the facility, an exit fee on the loan or the GDV, monitoring surveyor fees for each drawdown inspection, and valuation and legal fees. Ground-up schemes carry more cost risk than conversions, so the contingency, the contractor's strength and the developer's experience all move the price, alongside leverage, scheme type and location. The full cost structure is on the property development finance page.

As at 1 October 2026, the lowest development finance rate we were seeing was 0.45% a month, for the strongest schemes. Riskier schemes price above that, because pricing rises with leverage, scheme risk and the developer's experience. Every rate is subject to status and lender criteria and can change.

If you have a consented site and a build tender, get in touch. We run both caps against the scheme, check the drawdown schedule against the programme and tell you what the scheme supports before any lender is approached.

Ground up development finance criteria

The figures below are the positions we see on the cases we arrange, as at 1 October 2026. They describe our experience across the lenders we use and are not a rule for the whole market. Each lender sets its own criteria, and the terms on any scheme depend on the scheme, the borrower and the lender's own assessment.

Ground-up schemes, and how each is funded

Ground-up schemes are funded on the ceilings of their end use, so the first question a lender asks is what the finished building will be.

Ground-up housing

New-build houses on a cleared, brownfield or greenfield site, from a single plot to a multi-unit estate, attract the full residential ceilings: up to 75% LTGDV and 90% LTC on the cases we arrange. Lenders underwrite the consented drawings, a tendered or fixed-price build contract, the programme, the contingency, the developer's and contractor's track record, the warranty provider's registration of the plots and the sales evidence for the finished houses. The for-sale and develop-to-let exits are covered on residential development finance.

Ground-up apartment blocks

A new block of flats adds three things to the housing underwrite: the title structure (leasehold flats off a freehold, with a peppercorn ground rent on most new long residential leases granted since 30 June 2022), the building's height and fire-safety position, and how concentrated the exit market is. A block at least 18 metres high or with at least seven storeys, containing at least two residential units, is a higher-risk building under the Building Safety Act 2022. It needs building control approval from the Building Safety Regulator before construction starts and a completion certificate before occupation. These stages, still often called the Building Safety Regulator gateway approvals, sit on the critical path the lender funds against. The multi-unit exit is covered on MUFB mortgages.

Ground-up HMO and co-living

A purpose-built House in Multiple Occupation (HMO) or shared-living scheme is funded up to 75% LTGDV on the cases we arrange, with the exit underwritten on the HMO valuation route, the licensing position and the planning use. The exit is covered in our HMO mortgages guide.

Ground-up commercial

New-build industrial and logistics units, trade counters, offices, retail and healthcare premises are funded on the commercial ceilings: up to 70% LTGDV and 90% LTC on the cases we arrange, deal dependent, with pure commercial ground-up schemes usually nearer 65% LTGDV. The GDV is an investment valuation of the rent the finished building will earn, so a pre-let or forward sale decides how much the scheme can borrow. In our experience a speculative scheme takes the same LTGDV percentage, but on a softer valuation. The commercial exit is worked on commercial property development finance.

Ground-up mixed use

Shops or a surgery on the ground floor with flats above are appraised on a blended GDV and funded between the residential and commercial ceilings according to the split. The exit usually lands on semi-commercial mortgages for the whole building, or on separate residential and commercial refinances where the titles are split.

Ground-up hotels and student accommodation

Hotels and purpose-built student accommodation are valued on trading or rental income rather than sales, and are specialist lending: on the cases we arrange, specialist lenders fund both up to 65% LTGDV. See hotel development finance and PBSA finance.

Single plots and small sites

A single plot, an infill site or a scheme of a handful of units is funded on the same ceilings as a larger scheme, by lenders whose minimum loan suits the scale; on the cases we arrange, facilities start from around £50,000. Small-site lenders weigh the developer's own involvement, a fixed-price contract with a credible builder and a simple exit. First-time developers are covered on development finance for first-time developers.

Land without planning

A site without a buildable consent is funded with a land or bridging loan against its current value, at lower leverage, and the exit is planning consent followed by development finance. See land bridging loans.

The documents we ask for first depend on the end use: the consented drawings and the build tender for housing; the unit schedule, the height and the intended sales mix for a block; the licensing and planning position for an HMO; the pre-let or the letting evidence for a commercial scheme; the unit schedule and the intended title structure for mixed use; and the operator's business plan for a hotel or student scheme. For land, with or without planning, talk to us before buying.

How ground up development finance is arranged

1. We appraise the scheme against both caps for its end use, set the drawdown schedule against the build programme, define the exit (sale, refinance or retention) and obtain indicative terms from lenders whose criteria match.
2. The lender instructs a development valuation (current site value, GDV and a build cost review) and the monitoring surveyor's initial report on the cost plan, contract and programme. Its solicitors review the title, the planning consent and its conditions, and the Section 106 and Community Infrastructure Levy obligations, check the warranty registration and complete the security documents.
3. The day-one land advance funds part of the site purchase. Build costs are then drawn in arrears against the monitoring surveyor's certificates, stage by stage, with interest rolled up.
4. At practical completion the warranty and building control sign-off are issued, and the units are sold or refinanced, or a development exit loan takes over where sales run beyond the term.

The ground-up arithmetic

A ground-up facility is the lower of two caps, drawn in stages, with the developer's money going in first, and the developer can run each of those calculations before instructing anyone.

Step 1. The two caps by end use

One illustrative site is built three ways, each with a £2,400,000 gross development value and £1,900,000 of total cost (land £500,000, build £1,150,000, and fees, contingency and finance £250,000).

Illustrative arithmetic on hypothetical figures, using the ceilings we see on the cases we arrange. Not an offer of finance.

On the housing scheme the cost cap binds and the developer funds 10% of cost. On the commercial versions the value cap binds first, so on the same profit the lender carries less of the cost and the developer's equity rises from £190,000 to £220,000 at 70% LTGDV and to £340,000 at 65%.

Step 2. How the facility is drawn

The table below takes the housing scheme, with illustrative stage costs and a specialist lender's day-one land advance of 70% of the land value.

The developer's £190,000 goes in first: the £150,000 balance of the land price and £40,000 of the fees. The lender's £1,710,000 then covers the £350,000 land advance, the £1,150,000 of build drawdowns and £210,000 of fees and rolled-up interest inside the facility. Each build tranche is paid in arrears, after the monitoring surveyor certifies the work, so the contractor's payment terms and the developer's working capital have to bridge each stage. On the high street, where in our experience the day-one land advance is nearer 40% of the land value, the lender would advance £200,000 against the land and the developer would fund £300,000 of the price.

Step 3. Contingency and abnormals

Groundworks, drainage, services and ground conditions are where ground-up costs surface once digging starts. That is why lenders expect a contingency inside the cost plan and weigh the contractor's covenant and the developer's experience more heavily than on a conversion. A site investigation, a utilities search and a tendered groundworks package before the appraisal is finalised remove the largest unknowns. If costs run over, the overrun comes out of the developer's equity and profit first, because the facility is capped.

Step 4. Planning, levies and building safety

The lender funds against a consent that can be built: full planning permission, or outline permission with the reserved matters approved, with pre-commencement conditions discharged before the first build drawdown. The Community Infrastructure Levy and Section 106 obligations belong in the appraisal as costs. A higher-risk building needs building control approval from the Building Safety Regulator before construction starts and a completion certificate before occupation, and both sit on the programme.

Step 5. The exit

Lenders underwrite the exit as hard as the build. Houses and flats exit by sale or by refinance onto buy to let mortgages, and commercial buildings by sale or a commercial mortgage on the let asset. Where sales run beyond the term, development exit finance replaces the facility. The exit must repay the facility including rolled-up interest.

What decides the case

The site and the consent are fixed. The developer controls the end use and the exit mix, the build contract and contingency, the site investigations that remove the abnormals, and the choice of a lender whose appetite matches the scheme. Run both caps and the drawdown schedule before the valuation is instructed.

Related reading: the property development finance page covers the lender tiers and the capital stack; residential development finance and commercial property development finance cover each end use in depth.