Gross realisation value (GRV)
GRV is the sum of the expected sale prices of every lot, unit or tenancy in the finished project, usually quoted including GST and supported by a valuer's assessment. Loan-to-GRV (sometimes LRV) compares the facility to that figure — commonly capped around 60–70% in private development finance.
Lenders discount optimistic sales assumptions and rely on the valuer's comparable evidence, not the developer's pricing schedule.
Total development cost (TDC)
TDC captures everything: land or its current value, construction contract sum, consultants and professional fees, council contributions and authority costs, selling and marketing costs, finance costs including capitalised interest and fees, GST where applicable, and a contingency — typically 5% or more of construction.
Loan-to-cost is the loan divided by TDC. Private development facilities often run to 70–85% of TDC, with the balance funded by the developer's equity, usually contributed first.
Which ratio binds, and what it means for your equity
Apply both tests and take the smaller loan. On a project with $10M TDC and $13M GRV, 80% of cost is $8.0M while 65% of GRV is $8.45M — so cost binds and the developer needs $2M of equity. If sales prices soften and GRV drops to $11.5M, 65% of GRV is $7.475M and GRV becomes the binding constraint, requiring more equity.
That interaction also shows why lenders care so much about the profit margin: a project with a developer's margin under about 15–20% of cost has little room for cost overruns or price falls, which usually means lower leverage or a decline.
Key points
- GRV = projected total sales value of the completed project.
- TDC = every cost to complete, including interest and contingency.
- Loans are sized on both GRV and TDC; the lower figure applies.
- Thin developer margins reduce available leverage.
Frequently asked questions
Does GRV include GST?
It is usually quoted gross of GST, with GST treated as a cost or margin scheme adjustment in the feasibility. Confirm the basis in every quote.
How much contingency do lenders expect?
Commonly 5% or more of construction cost, higher for refurbishment or complex builds.
Are pre-sales required?
Private lenders are often more flexible than banks on pre-sales, but pre-sales improve leverage and pricing.