The world of property development finance is undergoing a significant transformation. Traditional banks are no longer the sole gatekeepers of capital. Instead, non-bank lenders, capital markets instruments, and shifting economic conditions are redefining how projects are funded. As property developers navigate this evolving landscape, understanding these changes—and how to leverage them effectively—can be the difference between stalled projects and successful developments.

At Development Finance Partners (DFP), we specialise in helping developers access tailored funding solutions beyond traditional banking. Here, we explore the rise of alternative lenders, new funding channels like CMBS, and the regulatory and interest rate shifts that are reshaping the industry.

In the U.S., alternative lenders accounted for about 33% of new commercial loan closings in Q2 2024, up from 26% a year earlier.
Banks, by contrast, pulled back to 30% of new loan volume (down from 43%) as higher interest rates and capital constraints made them more risk-averse.

Why Are Developers Turning to Non-Bank Financing?

Flexibility & Speed – Unlike banks, non-bank lenders can approve loans quickly and tailor terms to unique project needs.
Higher Risk Tolerance – Developers with unconventional projects or tight timelines find non-banks more accommodating.
Evolving Market Acceptance – A recent Australian survey found that 90% of small-to-medium developers are open to using non-bank lenders, a significant rise from 44% in 2018.

With private capital increasingly flowing into non-bank lending channels, developers have more funding opportunities than ever before.

Warehouse Facilities, Bonds, and CMBS: New Funding Channels for Developers

The financing mechanisms behind real estate lending are also evolving, with warehouse credit lines, bond financing, and Commercial Mortgage-Backed Securities (CMBS) gaining traction. These tools help non-bank lenders provide liquidity to developers while expanding their capacity to fund projects.

Warehouse Facilities – These revolving credit lines allow lenders to fund loans quickly before selling or securitising them, improving liquidity and execution speed for borrowers.
Bond & CMBS Markets – After a volatile 2022-2023, the commercial debt bond market rebounded in 2024, leading to a 150% increase in CMBS issuance, marking the highest volume since the Great Recession.
Impact on Developers – More capital flowing into these markets means easier access to funding and competitive rates, though timing is key as investor sentiment fluctuates.

Regulatory Shifts & Interest Rates: Challenges and Opportunities

The broader economic environment plays a critical role in development finance availability. Recent trends include:

Higher Interest Rates – While lending conditions tightened in response to rate hikes, some forecasts suggest potential rate cuts in late 2024, which could ease borrowing costs.
Stricter Bank Regulations – Major banks face capital constraints and increasing scrutiny, making them more selective in lending. This is pushing developers toward alternative lenders.
Investor Demand for Private Debt – Institutional investors, including pension funds and insurance companies, are pouring money into non-bank real estate debt, creating new funding opportunities.

Strategic Funding Solutions for Developers

Savvy developers are already leveraging non-bank funding strategies to stay ahead:

1. Land Bank Loans: Unlocking Capital for Site Acquisition

Higher LVRs – Up to 70% LVR, compared to banks' 40-50%.
Interest Capitalisation – No need to demonstrate serviceability or make monthly repayments until refinancing or construction begins.
Faster Approvals – Non-banks can approve land finance in days, enabling developers to move quickly.

2. No-Presales Construction Finance: A Faster Path to Development

Start Construction Faster – Avoid pre-sales hurdles and begin building immediately.
Maximise Sale Prices – Sell closer to completion when values are higher.
More Flexibility – Hold and rent units instead of being forced to sell under pressure.

3. Equity Recycling: Unlocking Capital Through Cash-Out Loans

Cash-Out Refinancing – Access equity in completed projects to fund new acquisitions.
Residual Stock Loans – Extract capital from unsold properties without immediate liquidation.
Bridge Loans for Liquidity – Move quickly on new opportunities with short-term financing.

How Developers Can Stay Ahead

Diversify Funding Sources – Combine senior debt, land bank loans, cash-out loans, and no-presales construction finance for a well-rounded capital strategy.
Build Relationships with Alternative Lenders – Non-bank lending is relationship-driven. Establishing connections early leads to better terms and faster approvals.
Time Your Financing – Monitor interest rate trends and market liquidity to secure funding at the most favourable terms.

Final Thoughts: Finance Smarter, Build Faster

The development finance landscape is evolving rapidly. While banks are tightening lending criteria, non-bank lenders and capital markets are filling the gap with flexible, tailored funding solutions.

At DFP, we help developers navigate this dynamic environment by structuring financing solutions that align with their growth strategies. By leveraging land bank loans, no-presales construction finance, and equity recycling, developers can move forward with confidence—on their own terms.