What is a good LTGDV for development finance?

There is no single right level. Each lender publishes or sets its own maximum, and it varies with the type of scheme, the market, the developer's record, how firm the build price is and how well the value is evidenced by sales or presales. Senior lenders set lower limits than stretch senior or mezzanine lenders, who take a larger share of the value for a higher price. Comparing two offers also means checking whether each limit includes the interest added to the loan.

What is the difference between LTGDV and loan to cost?

They ask different questions of one facility. LTGDV asks whether the finished scheme's value will clear it; loan to cost asks how much of the spending, finance included, the developer has paid for itself. The first protects the lender against prices falling short; the second keeps the developer's own money in the project. A lender usually sets a limit on each and lends the smaller result, so a scheme with a large expected profit is often held back by the cost test.

Does LTGDV include rolled-up interest?

Usually, though not with every lender. Development interest is normally added to the loan rather than paid during the build, so the facility at completion includes it, and most lenders test the ratio on that gross figure along with their fees. Some quote a limit on the cash advanced instead. The difference on a two-year build can be several percentage points, so a borrower comparing terms asks which basis each offer uses.

Is GRV the same as GDV?

They describe the same thing: the expected value of the finished scheme on sale. Gross realisation value is the term more common in Australia and New Zealand, gross development value in the UK. The practical difference is in the adjustments. Australian lenders commonly take GRV net of GST, and some lenders also deduct selling costs to reach a net figure, so a percentage limit means little until the base it is applied to is known.

// WORKED EXAMPLETHE ARITHMETIC A DECISION RESTS ON

Loan to Gross Development Value: a Worked Example

The ratio is set on a building that does not exist yet.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-07

// THE SHORT ANSWER

A development lender cannot lend against a building that has not been built, so it lends against what the finished scheme should sell for and caps the debt as a share of that figure. Loan to gross development value is that cap. Because interest and fees are added to the debt while the scheme is built, the number a lender tests is normally the whole facility at completion, not the cash it hands over. The ratio then moves with two things the developer does not control, the valuer's view of prices and the length of the build, which is why a lender reads it beside loan to cost.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// MAKE THE CALL

Issue 08 — Basalt Ridge Developments. A new-to-bank developer, a claimed 28% ROE and two other banks circling. Your bank has a growth target. Your call first, then the senior banker's.

Read the file →

// 01 — WHY A LENDER LENDS AGAINST THE FINISHED VALUE

A development loan is repaid by selling the finished units, or by refinancing them once they are let. On the first day the security is a site worth a fraction of the debt that will be drawn against it; the value arrives as the building rises. The question a lender has to answer is therefore not what the land is worth today but whether, once the scheme is complete and sold, the proceeds will clear everything owed with room to spare.

The figure for that is the gross development value: a valuer's opinion of what the completed units would fetch, built up from comparable sales or, for a scheme that will be let, from the expected rent capitalised at a market yield. The lender instructs the valuer itself, often from its own panel, rather than relying on the developer's price list. The UK market uses GDV and LTGDV as the headline terms. In Australia and New Zealand the same test is often run on gross realisation value (GRV), and Australian lenders commonly take that figure net of GST, since the developer owes the tax out of the sale price.

// 02 — HOW THE RATIO IS BUILT

Gross loan = land and build advances + lender fees + interest added to the loan

LTGDV = gross loan ÷ gross development value

LTC = gross loan ÷ total development cost, finance included

The top of the ratio is the facility as it will stand at completion. A development loan usually carries capitalised interest: nothing is paid during the build, and the interest is added to the balance until the units are sold. The forecast of that interest, and of the fees, belongs in the numerator from the start. Lenders do not all quote on the same basis, though. Some publish a limit on the cash advanced and test interest separately, so two offers at the same percentage can be different amounts of money.

The ratio is not set once. At each drawdown the lender's quantity surveyor checks the work done and the cost to complete, and a revaluation, if the market moves or the build runs late, resets the bottom of the ratio while extra interest raises the top.

// 03 — THE EXAMPLE

A developer, constructed for this page like every figure in it, is building twelve small warehouse units to sell to owner-occupiers. The lender's valuer puts the finished units at US$1.25m each, a GDV of US$15.0m. The developer puts its own money in first, and the lender funds the rest of the cost, including its interest and fees.

Land 3.00

Build 7.20

Professional fees, consents, contingency 1.30

Cost before finance 11.50

Interest added to the loan 0.85

Lender fees 0.20

Total development cost 12.55

Developer's equity, spent first − 3.25

Gross loan 9.30

LTGDV, gross loan: 9.30 ÷ 15.00 = 62.0%

Cash advanced: 8.25 ÷ 15.00 = 55.0% ← interest and fees left out

Loan to cost: 9.30 ÷ 12.55 = 74.1%

The gap between the first two lines is the US$1.05m of interest and fees. A developer comparing offers on the second basis would think the loan was safer than it is. Now suppose the valuer's view of prices falls by 10% before the units sell, and the build runs six months late, adding US$0.40m of interest inside the facility:

Prices down 10%: 9.30 ÷ 13.50 = 68.9%

And six months late: 9.70 ÷ 13.50 = 71.9%

Developer's margin before: 15.00 − 12.55 = 2.45 (19.5% on cost)

Developer's margin after: 13.50 − 12.95 = 0.55 (4.2% on cost)

The lender is still covered, before selling costs. The developer's margin, which stands between a fall in prices and the bank's money, has lost more than three-quarters of its size. The percentages are the example's, not a market norm.

// 04 — THE RATIOS A LENDER READS BESIDE IT

LTGDV asks whether the end value covers the debt. Loan to cost asks how much of the developer's own money is at risk, and a lender often sets a limit on each and lends the lower amount. In a rising market the value test is easy to pass while the cost test binds; when prices soften, the reverse. A scheme that passes on value alone, with little equity in it, has a developer with less reason to stay to the end.

Profit on cost is the cushion the example shows shrinking: the margin a falling market eats before it reaches the loan. Many bank lenders in Australia and New Zealand also ask for qualifying presales, binding contracts for part of the units, covering a share of the debt before the first construction draw, because a contract is evidence of value that a valuer's opinion is not.

DEFINED IN ONE PARAGRAPH → · PRODUCT FILE: DEVELOPMENT LOAN → · ON-COMPLETION VALUE →

// 05 — WHERE IT DECIDES A FILE

Most arguments about LTGDV are arguments about the GDV. A developer's appraisal prices the units at the top of the evidence; the lender's valuer prices them on what has actually sold nearby, and every dollar of difference moves the loan by the lender's percentage. The Basalt Ridge file on this site starts from there: the value in it rests on the developer's own price list, and no valuer has yet been instructed.

Once the loan is drawn, the ratio governs the exit. As units sell, the lender takes a release price from each settlement, often more than the unit's share of the debt, so that the ratio on the unsold stock falls as the scheme sells down rather than rising as the best units go first. And when a build runs late, the extra interest is the line to watch: it is added to the loan quietly, month by month, while the value it is measured against stands still.

PROPERTY DEVELOPMENT FINANCE → · DRAWING A DEVELOPMENT LOAN → · STRETCH SENIOR →

// QUESTIONS PEOPLE ASK

What is a good LTGDV for development finance?: There is no single right level. Each lender publishes or sets its own maximum, and it varies with the type of scheme, the market, the developer's record, how firm the build price is and how well the value is evidenced by sales or presales. Senior lenders set lower limits than stretch senior or mezzanine lenders, who take a larger share of the value for a higher price. Comparing two offers also means checking whether each limit includes the interest added to the loan.
What is the difference between LTGDV and loan to cost?: They ask different questions of one facility. LTGDV asks whether the finished scheme's value will clear it; loan to cost asks how much of the spending, finance included, the developer has paid for itself. The first protects the lender against prices falling short; the second keeps the developer's own money in the project. A lender usually sets a limit on each and lends the smaller result, so a scheme with a large expected profit is often held back by the cost test.
Does LTGDV include rolled-up interest?: Usually, though not with every lender. Development interest is normally added to the loan rather than paid during the build, so the facility at completion includes it, and most lenders test the ratio on that gross figure along with their fees. Some quote a limit on the cash advanced instead. The difference on a two-year build can be several percentage points, so a borrower comparing terms asks which basis each offer uses.
Is GRV the same as GDV?: They describe the same thing: the expected value of the finished scheme on sale. Gross realisation value is the term more common in Australia and New Zealand, gross development value in the UK. The practical difference is in the adjustments. Australian lenders commonly take GRV net of GST, and some lenders also deduct selling costs to reach a net figure, so a percentage limit means little until the base it is applied to is known.

THE IN-TRAY · ONE MINUTE

Make the call on one file.

A short file on the ground this page covers. Every option opens with how far it sits from a senior banker’s read.

THE NUMBER · THE ECONOMY · COLLATERAL MARKETS

A bank lent 65% of the value of a factory valued at US$10m. If it has to sell, it expects a forced-sale discount of 30%, and selling costs of 5% of the sale price.