Joining up the development process

Mortgage Introducer

February 15, 2018

Steve Larkin (pictured) is director of development finance, LendInvest

Back in 2015, following the Conservative Party’s surprise win at the general election, Brandon Lewis MP – then the housing minister – announced that the government intended to build one million new homes over the course of the parliament.

It’s fair to say that plenty of people within the housing industry viewed that aspiration as overly ambitious. Yet according to new analysis from Savills, the housebuilding industry is in fact on track to meet that target, thanks to a significant increase in the number of homes being built.

This is a welcome sign that small and medium-sized developers – for so long overlooked in favour of the big developers – are beginning once again to play a significant role in the delivery of new homes in the UK.

While the government has taken real steps to improve the lot of small developers, familiar problems persist.

When the House Building Federation looked specifically at the position of small developers today, it is no surprise that it identified access to development finance as one of the biggest barriers holding them back.

The issue that many small developers face is not simply that relatively few lenders are active in the market – the high street banks are just not interested for example – but that the loans are not always designed to actually meet their specific needs, or by lenders who intimately understand the development process.

A development project encompasses many different stages, and a developer’s financing needs change as that project continues. We have built a full range of individual development finance products that reflect that.

There’s pre-construction for those developers who want to secure a specific site while seeking new or enhanced planning permission, development finance then the development exit finance, to help borrowers whose project is all but finished but who still require some additional marketing time to cover the period until the units are all sold.

Developers don’t want to go through the hassle of finding pre-construction finance, and then having to find new development finance, and then move onto development exit finance, all from different lenders.

That process takes time and energy, which could be better devoted towards actually getting on with the job of building homes.

No, developers increasingly want to find a single lender who can deliver the requisite funding at all of those distinct stages, who can work alongside them from the very earliest stages of the development until the keys are handed over to the buyer of the final unit.

That’s why we have brought together all of our various development finance products into a single development suite using a new product transition process.

If we are to see small developers thrive, and see future housing targets met, then it’s beholden on lenders to find new and innovative ways to better meet their funding needs.

Designing products to help in specific stages of the development process can only be the beginning; it’s up to us now to show how we can support developers over the full term not just of an individual project, but future ones too.

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