Quick answer
Land awaiting rezoning or a development approval earns nothing and cannot yet support a construction loan, which leaves a funding gap during the planning process. A secured loan over the land, often with additional property, can repay an existing lender, fund holding costs and capitalise interest until the approval is granted. It is then repaid by a construction loan, a sale of the approved site or a refinance.
Key points
- Bridges the planning period when banks will not lend
- Can refinance an expiring land loan
- Interest capitalised so nothing is paid monthly
- Covers rates, land tax, consultants and application fees
- Approval timelines are uncertain: build a generous buffer
The planning gap
Rezoning and development approvals are where much of a property’s value is created. A site that moves from rural to residential zoning, or wins approval for apartments instead of a single house, can change in value dramatically. But the process can take months or years, and during that time the land produces no income and most banks will not lend against it. Developers who bought with a short-term land loan may find it expiring before the approval arrives.
How a holding loan works
A secured loan over the land, and often over another property, provides the funds needed to hold the site until the planning outcome is known:
- repaying an existing land loan that is expiring
- capitalising interest so nothing needs paying monthly
- covering council rates, land tax and insurance
- funding consultants, reports and application fees
- releasing some equity for other commitments, where the LVR allows
The land is assessed on its current zoning and evidence, not on the hoped-for approval. That conservative approach protects both sides if the outcome is delayed or different from the plan.
Building a realistic timeline
| Stage | Things that add time |
|---|---|
| Pre-lodgement | Consultant reports, council meetings, design changes |
| Assessment | Requests for information, referrals to agencies |
| Notification | Objections from neighbours or community groups |
| Determination | Council meeting cycles, independent panels |
| Appeals | Court or tribunal processes if refused or conditioned |
Plan the loan term around a realistic, not optimistic, timeline. The loans are flexible and can stay in place if the process runs long, but a generous buffer from the start avoids pressure.
Map your approval timeline with a specialist and size the holding loan properly.
Exits after approval
- Construction finance for the developer’s own project, which repays the holding loan at the start of the build.
- Sale of the approved site to another developer, often at a higher value.
- Joint venture with a builder or capital partner who funds the next stage.
- Refinance to a lender comfortable with approved land.
A backup exit, such as selling the land in its current state, gives the lender confidence and protects you if the approval is delayed or refused.
An illustrative holding loan
Illustrative only. A family company bought a large lot on the edge of a regional city with a bank land loan, planning to subdivide. The subdivision application has attracted objections and the council has requested further reports. The bank’s loan expires in two months and it will not extend. A private first mortgage over the land, with a second mortgage over the family’s investment property, repays the bank and capitalises interest for eighteen months. The subdivision is approved fourteen months later, and the company sells the first stage of lots to a builder, repaying the loan.
Questions to ask before borrowing
- What is the land worth today, on current zoning, not after approval?
- What is the realistic approval timeline, including possible appeals?
- What are the total holding costs over that period?
- What happens if the approval is refused or heavily conditioned?
- Which construction lender or buyer is the intended exit, and what will they require?
Our guide on vacant land as security covers how lenders weigh these questions.
Rezoning versus development approval
These two processes are different. Rezoning changes what the planning scheme allows on the land, usually through a planning proposal or scheme amendment that can take a long time and involves state as well as local government. A development approval assesses a specific proposal against the existing controls. Rezoning generally carries more uncertainty and a longer timeline, so holding loans for rezoning sites tend to be more conservative on LVR and longer on term than loans for sites with a DA in assessment.
Keeping the lender informed
Planning processes produce plenty of news: requests for information, amended plans, objections, meeting dates. Sending a short update to your lender when something material happens builds confidence and makes any later conversation about extending the term far easier. Silence followed by a request for more time is the pattern that makes lenders nervous.
Using the time productively
While the application is assessed, many owners prepare for the next stage: obtaining quotes from builders, talking to construction lenders, testing the market for pre-sales or speaking with potential buyers for the approved site. That preparation shortens the time between approval and exit, which reduces the total cost of the holding loan.
Patience, funded properly
Planning approvals reward owners who can hold their nerve and their land. Tell us about the site, its current zoning, the application status, any existing loan and your exit plan, and a specialist will tell you whether a holding loan can carry you through. There is no credit check when you first enquire, your details are kept within one team, and accurate planning information helps us structure a term that reflects reality. Talk about holding finance.
Frequently asked questions
Can I borrow against land before it is rezoned?
Yes. The land is assessed on its current zoning and market evidence, with the potential upside from rezoning considered as part of the exit rather than the current value.
What if the rezoning or DA is refused?
That is why a backup exit matters. Options include appealing, redesigning the proposal, selling the land as is, or refinancing. Lenders assess the loan on the land's current value for this reason.
How long do approvals take?
It varies widely with the council, the scale of the proposal and whether objections or appeals arise. Plan for longer than the official timeline.
Can the loan pay for consultants and reports?
Yes, where the exit supports it. Planning consultants, surveys, engineering and environmental reports are common inclusions.
Prefer to start now? Enquire here
About 60 seconds. No credit check when you first enquire, and a secured lending specialist calls you back.