Quick answer
Part-complete development finance refinances a stalled project, such as one where the construction lender has stopped drawing, the facility has expired or the builder has failed, and can help fund the work needed to finish. It is secured over the site and often other property, assessed on the as-is value and the completed value, and repaid from sales or a residual stock loan once the project is complete.
Key points
- For projects stalled by lender, builder or cost problems
- Can repay the existing construction lender
- Assessed on as-is value, cost to complete and end value
- Requires a credible completion plan and budget
- Exit: sales, residual stock finance or refinance
How projects stall
Construction is where development risk concentrates. Costs rise, builders fail, weather delays work, and lenders tighten when a project falls behind. Any of these can leave a development half-built: frame up, roof on, fit-out unfinished, and the construction facility frozen or expired. The developer is left holding a partly built asset that is hard to sell and expensive to hold.
The most common causes:
- Builder insolvency. The builder stops work and the developer must appoint a replacement.
- Cost overruns. The construction loan cannot cover the remaining work.
- Facility maturity. The construction loan expires before practical completion.
- Lender withdrawal. The construction lender stops drawdowns after a default or a missed milestone.
What part-complete finance does
A secured loan over the project and often other property can:
- repay or refinance the existing construction lender
- provide time to appoint a new builder and confirm the cost to complete
- fund some or all of the remaining works, where the security supports it
- carry the project to practical completion and sale
How lenders assess a stalled project
| Question | Evidence needed |
|---|---|
| What is it worth today? | Site value plus the value of works completed, assessed from evidence |
| What will it cost to finish? | A fresh quantity surveyor or builder’s estimate with contingency |
| Who will finish it? | Replacement builder’s contract, licence and capacity |
| What will it be worth when finished? | Sales evidence for comparable completed product |
| How will the loan be repaid? | Sales, pre-sales still in place, or residual stock finance |
The lender’s comfort comes from a credible completion plan. Projects with a clear budget, a capable builder and realistic sales evidence are financeable. Projects with open questions on any of these need those questions answered first.
Discuss your stalled project with a specialist before the existing lender takes enforcement steps.
Working with the existing lender
If the current construction lender is still involved, keep it informed. Lenders generally prefer to be repaid through a refinance than to enforce. A clear plan, with a replacement lender lined up, can buy time and avoid default interest and enforcement costs. If receivers or a mortgagee in possession are already involved, see receivership refinance.
Pre-sales and purchaser contracts
Off-the-plan purchasers may have rights if the project is delayed beyond the contract’s sunset date. Check the contracts with your solicitor. Pre-sales that remain on foot strengthen the exit; contracts at risk of rescission need to be factored into the plan.
An illustrative part-complete refinance
Illustrative only. A developer is building eight townhouses when the builder enters administration with the project around two-thirds complete. The construction lender suspends drawdowns. The developer engages a new builder, who prices the remaining works. A private first mortgage over the site, with additional security over the developer’s investment property, repays the construction lender and funds the completion in stages. The townhouses reach completion five months later; most pre-sales settle, and a residual stock loan covers the remainder until they sell.
After completion
Once the project is complete, the finance often transitions to a residual stock loan for any unsold units, repaid progressively from sales. Planning that step in advance keeps the project moving smoothly from construction to sell-down.
Pitfalls to avoid
- relying on the original builder’s cost estimate after a collapse
- forgetting the cost of rectifying defective work
- ignoring sunset dates in off-the-plan contracts
- underestimating the time to appoint a replacement builder
- waiting until enforcement begins before seeking refinance
Building a cost-to-complete you can rely on
The single most important document in a part-complete refinance is the cost-to-complete. After a builder failure or a cost blowout, the original budget is no longer reliable. Commission an independent quantity surveyor or obtain a fixed-price contract from the replacement builder, and include a contingency for defects in the existing work, which often only become visible once a new builder inspects the site. Allow for re-establishing site facilities, scaffolding and insurances, and for any statutory certifications that need to be redone.
Insurance and warranty issues
Builder insolvency can affect home warranty or domestic building insurance, and statutory warranties for completed work. Check the position with your solicitor and the relevant state authority before finalising the completion plan. In Queensland, for example, the building regulator administers its own home warranty scheme; other states have their own arrangements. These issues can affect both the cost to complete and what buyers will expect.
Communicating with buyers
If off-the-plan buyers are waiting, keep them informed with honest, regular updates about the new builder and the revised timeline. Buyers who feel informed are less likely to look for reasons to rescind, and every contract that stays on foot strengthens the exit.
Rescue the project, protect the margin
A stalled development is stressful, but it is often recoverable with the right plan and the right finance. Tell us about the project, the existing lender, the cost to complete and the sales position, and a specialist will tell you what is realistic. There is no credit check when you first enquire, your details stay within our team, and an honest picture of the project’s position helps us respond quickly. Talk about your project.
Frequently asked questions
Can a private lender refinance a half-built project?
Yes, case by case. The lender looks at the as-is value of the site and works, the cost to complete, the completed value and the plan for finishing and selling.
What if my builder has gone into liquidation?
You will need a replacement builder, a fresh cost-to-complete estimate and legal advice about the original contract. Finance follows once the completion plan is clear.
Can the loan fund the rest of construction?
Sometimes, in stages, where the security and exit support it. In other cases the loan refinances the existing lender and a specialist construction lender funds the remaining works.
How are part-complete projects valued?
On their current state and cost to complete, with the completed value considered as part of the exit. Lenders assess risk carefully because unfinished buildings are hard to sell.
Prefer to start now? Enquire here
About 60 seconds. No credit check when you first enquire, and a secured lending specialist calls you back.