A feasibility is a decision tool, not a sales document
A development feasibility tests whether a proposed project can meet its costs, funding obligations and commercial objectives under realistic conditions. Funding readiness adds the evidence and organisation required for a financier to assess those conclusions. A spreadsheet showing profit is only the starting point. The lender needs to understand which assumptions are verified, what remains uncertain and who bears the downside. This article provides general educational guidance for Australian property projects. It does not certify a feasibility, predict approval or replace advice from legal, accounting, planning, valuation and construction professionals involved in a specific development.
Begin by stating the decision the model supports. Buying a site, committing to construction and refinancing completed stock are different decisions with different information requirements. An early feasibility can use provisional assumptions, provided they are clearly labelled and subsequently investigated. A construction funding submission should generally contain more developed scope, cost and timing evidence. Do not carry optimistic acquisition assumptions forward unchanged just because they once supported a purchase. The model should evolve as the project becomes clearer, including admitting when new information weakens the original rationale rather than hiding it in a revised presentation.
Define the project and approval position
Document the site, ownership, existing use, intended product, proposed yield and current approval status. Planning permissions, conditions and unresolved applications should match the designs used in cost and revenue estimates. A model for twenty dwellings is misleading if only sixteen are approved or if additional infrastructure is required before occupation. Obtain current advice about jurisdiction specific requirements instead of assuming a fixed nationwide process. Identify third party dependencies such as access agreements, utility upgrades and land assembly. These can affect not only feasibility but the timing at which lending conditions can actually be satisfied.
Create an assumptions register linking each major input to its source, date, confidence level and person responsible for verification. A signed construction contract differs from a builder's preliminary estimate, and a current sale contract differs from an agent's appraisal. The register should distinguish verified facts, professional opinions and sponsor assumptions. Set a date for updating material items. This simple discipline prevents a polished lender submission from mixing old figures with new plans and makes it easier to focus due diligence spending on the uncertainties most capable of changing the investment decision.
Build a complete sources and uses schedule
Uses include land acquisition, transaction expenses, design, statutory charges, civil works, construction, professional fees, marketing, selling costs, financing and contingency. Seek qualified tax advice on GST and other relevant treatment, and show cash timing separately from final economic cost. Recoverable amounts can still require temporary funding. Do not omit a cost because another entity initially pays it; clarify whether it is a contribution, a loan or a reimbursable expense. Reconcile the total with the detailed cost plan and identify known allowances separately from general contingency so uncertainty is not concealed in an unexplained percentage.
Sources include sponsor cash, accepted land equity, senior debt, junior debt and committed investor capital. Each source should have an amount, timing and draw conditions. An indicative finance conversation is not the same as signed available funding. A facility limit can include fees or interest reserves that do not reach the construction account. Likewise, land equity is not liquid cash for paying a consultant. Reconcile both total project funding and immediately available funds. A schedule that balances at completion may still contain a gap at acquisition or during the first construction months.
Revenue needs evidence and deductions
Revenue estimates should reflect the actual product, location, buyer market and competition. Use comparable transactions with attention to date, size, condition and incentives. Distinguish gross prices from net sale proceeds after commissions, marketing adjustments, settlement costs and tax provisions. Presales should be recorded by contract status, deposit, conditions and expected settlement date. A proposed rental exit needs sustainable rent, operating costs and an investment finance assessment rather than a capital value assumption alone. Where a valuer or agent provides an opinion, understand its basis and limitations instead of treating it as a guaranteed realised price.
Avoid blending unlike products into a single average that hides weaker units. A development may contain premium apartments, less attractive layouts, retail space and parking with different sale prospects. Model their receipts individually or in meaningful groups. Stock absorption should consider buyer depth and the time required to settle the last units, not only sell the first. If competitors are offering incentives, compare effective prices rather than advertised prices. Revenue diligence is especially important when a small fall in proceeds would remove most of the development margin or leave insufficient funds to repay senior and junior obligations.
Time is a financing input
Project cash flow should connect planning, procurement, construction, approvals, title registration and settlements. Expenses do not occur evenly, and physical completion does not necessarily release sale proceeds immediately. Map builder claims, consultant payments, interest and taxes to realistic dates. Include lender inspection and processing time where progress draws fund construction. Identify the lowest cash balance and the maximum equity requirement. A project can show an acceptable overall profit while requiring cash the sponsor cannot supply during the busiest period. That mismatch is a funding problem even if the final spreadsheet total remains positive.
Where interest is capitalised, calculate it on the relevant debt balances and include its effect on available facility capacity. Delays can increase interest while postponing receipts, creating two pressures at once. Review maturity dates and proposed extension assumptions separately from the construction programme. A lender term longer than the building period may still be inadequate if titles and buyer settlements follow slowly. Make sure the model's financing logic matches the proposed documents. A generic interest allowance is a useful early estimate, but it should be replaced with a transparent calculation before decisions depend on it.
Sensitivity testing that changes decisions
Sensitivity testing should cover lower revenue, higher costs, longer time and slower sales, individually and together. Report effects on profit, required equity, peak debt and ability to meet release conditions. Choose plausible stresses informed by the project rather than only neat round percentages. The useful output is a decision threshold: the price, delay or overrun at which more capital is needed or the project no longer meets the sponsor's objective. Identify who can supply that capital and whether they are committed. A scenario is not adequately addressed by writing that the developer will manage it.
Consider specific event risks as well as numerical changes. A builder replacement can involve site security, consultant work, unfinished subcontractor packages and a restart delay. A refused utility connection can require redesign or offsite works. A major purchaser failure can affect multiple settlements if contracts are concentrated. Assess contractual risk allocation with appropriate advisers and recognise that a counterparty may be unable to honour its obligation. Contingency should be grounded in remaining uncertainty. It is not a substitute for resolving known scope gaps or a justification for leaving major investigations until after finance is committed.
Illustrative readiness review
Suppose an illustrative developer forecasts $7.2 million sale revenue and $6 million total project cost, apparently leaving $1.2 million before any omitted items. A readiness review finds that $200,000 of selling and connection expenses was excluded, while the programme assumes settlements immediately after building completion. Adding those costs and allowing a further period of interest reduces the forecast return. The revised model is less attractive but more useful. These invented figures are not a valuation, expected margin or finance offer; they show how an incomplete budget can overstate both profitability and available repayment cash.
Now test a revenue reduction of $360,000, a cost increase of $180,000 and a three month delay. The developer should calculate the revised margin and the month when available funds become insufficient, rather than merely listing the three changes. If lender advances remain capped, extra equity may be needed before sale proceeds arrive. Evidence of a committed reserve can improve readiness; an unsupported promise cannot. The project might need repricing, revised scope, additional capital or a decision not to proceed. A feasibility has done its job when it supports that difficult conclusion, not only when it produces an approval friendly outcome.
Create a coherent lender submission
Organise the submission around the project brief, ownership, approvals, feasibility, monthly cash flow, valuation, cost evidence, builder assessment, sales information and sponsor contribution. Use version control and ensure every document describes the same current project. An index with dates is more helpful than a large folder of unexplained files. Highlight conditions still outstanding and the planned path to satisfying them. Lenders may request additional information, but a coherent pack reduces avoidable clarification. It also lets the sponsor compare offers against the same assumptions instead of receiving terms based on inconsistent versions of the budget.
Funding readiness also means understanding terms before accepting them. Compare eligible costs, draw requirements, security, guarantees, presale conditions, release prices, fees and maturity. Calculate the total cost under the base and stressed timelines. A larger nominal facility may provide less usable construction money if reserves and charges differ. Obtain independent legal advice on obligations and an accountant's review of the model where appropriate. Advisers can coordinate the process, but the sponsor should be able to explain the sources and uses, expected repayment and response to a shortfall in plain language.
Feasibility and readiness questions
Does a strong margin guarantee development funding?
No. A lender also considers evidence quality, approvals, borrower capacity, construction risk, security, sales and its own criteria. An apparently high margin based on unsupported prices can be less persuasive than a modest result supported by reliable contracts and reserves. The feasibility should disclose assumptions rather than optimise them for presentation. Finance approval also does not certify commercial success. Continue independent due diligence and consider whether the project meets the sponsor's objectives even if a provider is willing to lend.
When should the model be updated?
Update it when material costs, designs, approvals, contracts, timing or funding terms change, and regularly during delivery. Reconcile forecast final cost with actual commitments and payments. Preserve previous versions so changes can be traced, but identify the current approved version clearly. Reporting only historic expenditure can miss obligations already incurred but not yet invoiced. An updated feasibility should explain why outcomes changed and what action is required, helping participants respond before a small deviation becomes an unmanageable capital or repayment problem.
Next steps toward a funding ready project
Audit the assumptions register, close high impact evidence gaps and reconcile the feasibility with a monthly cash flow. Confirm sponsor funds and the legal availability of investor or junior capital. Assemble current project documents, seek specialist advice and identify the decisions that remain conditional. Set explicit limits for price, exposure and extra capital before negotiating finance. Development feasibility and funding readiness are complementary: one tests the commercial proposition, the other makes that test assessable and actionable. Neither removes uncertainty, but together they help prevent borrowing decisions based on incomplete costs, unrealistic timing or an exit that exists only on paper.
