What percentage of presales do banks require?

There is no single figure, and the answer varies with the lender, the market, the type of project and the cycle. Some measure cover against debt and others against units. In Australia, APRA noted in 2017 that banks were generally asking for presales of at least 100% of committed debt, and clarified in 2025 that this was not a minimum requirement. Non-bank lenders often accept less, at a higher price and for a loan that carries the difference in risk.

What happens if a presale buyer does not settle?

The developer can usually keep the deposit and claim any further loss from the buyer, subject to the contract and local law, but recovering it from an individual is slow and uncertain. The unit goes back on sale, often in a weaker market. For the lender, the expected repayment does not arrive on the date assumed, so more of the debt rests on unsold stock and the loan runs longer, with interest still accruing.

Who holds the deposit on an off-the-plan sale?

It depends on the contract and the jurisdiction. In New South Wales, for example, off-the-plan deposits must stay in a trust or controlled money account during the contract period, and a buyer may give a bank guarantee or deposit bond instead of cash. Elsewhere the contract and local law decide. A lender wants to know which applies, because a deposit that has already been spent cannot also be counted in the cash that arrives at completion. A buyer has separate reasons for asking the same question.

Can a developer get finance without presales?

Sometimes. A developer can offer more equity, a lower loan against cost, other security or a strong record, and some projects, such as those with a pre-let or a committed buyer for the whole, depend less on individual sales. Non-bank lenders may also be willing to lend with fewer presales at a higher cost. What changes is who carries the risk that the units do not sell, and the price charged for carrying it.

// WORKED EXAMPLETHE ARITHMETIC A DECISION RESTS ON

Presales: a Worked Example

A signed contract counts only if the money arrives.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-09 · 6 MIN READ

// THE SHORT ANSWER

A developer reports that buyers have signed for 14 of 24 apartments, and the lender's first job is to find out how many of those signatures will turn into money on completion day. Presales are counted against the debt because each contract that settles repays part of the loan before the open market is needed. But the headline flatters. In the example here, 85% of the debt on paper falls to 60% once conditional contracts, a related buyer and selling costs come out, and to 45.5% if three buyers then fail to settle.

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 →

PART OF Property Development Finance

// 01 — WHY A LENDER WANTS BUYERS BEFORE IT BUILDS

A development loan has no earnings to repay it. It is repaid when the finished units are sold, and at the moment of approval nobody can be certain that they will be, or at what price. A signed contract brings part of that future forward. It is evidence that real buyers want this product at this price, and it fixes a part of the cash that will arrive when the building is finished.

Presales also change what happens at the end of the loan. Whatever the sold units do not repay is left secured on stock that has to be sold into whatever market exists on completion. The higher the cover, the smaller the part of the debt that depends on it. In some projects, presales also underpin the valuation, because they are direct evidence of prices.

// 02 — HOW THE COVER IS COUNTED

Presale cover = qualifying net sale proceeds ÷ total debt

or, by units = qualifying contracts ÷ total units

The word that matters is qualifying, and each lender writes its own definition. Contracts usually have to be unconditional, with any finance or due-diligence condition satisfied. Many lenders exclude sales to the developer's relatives and associated companies, limit the number one investor can hold, and look for a meaningful deposit. Proceeds are generally measured after selling costs and, where it applies, sales tax, because that is what actually reaches the lender. In England and Wales a reservation does not commit the buyer to purchase; the sale binds only on exchange of contracts.

Australia's capital rules use presales directly, for some lenders. Under APS 112, where a bank on the standardised approach has more than 5 million Australian dollars exposed to a borrower on one residential development, a 100% risk weight rather than 150% requires, among other conditions, qualifying presales at least equal to total debt. Lending policy is another matter. In February 2025 APRA clarified that its 2017 reference to presales of 100% of committed debt described observed practice and was not a minimum requirement or expectation.

// 03 — THE EXAMPLE

A developer of 24 lakeside holiday apartments, constructed for this page like every figure on it, has peak debt of US$14.0m and reports 14 contracts at an average of US$0.85m. Figures are US$ millions. The 10% cost deduction is the example's, and so is every level of cover shown.

14 contracts × 0.85 11.90 85.0% of debt

Less 2 still subject to buyers' finance −1.70

Less 1 bought by the developer's relative −0.85

Unconditional, arm's length: 11 contracts 9.35

Less sales tax and selling costs at 10% −0.935

Net qualifying proceeds 8.415 60.1% of debt

Then the market falls 12% between contract and completion. For one buyer, in US$ thousands:

Contract price 850.0

Deposit paid, 10% 85.0

Buyer's planned loan, 80% of price 680.0

Cash the buyer planned to find: 850 − 85 − 680 = 85.0

Value at completion, down 12% 748.0

Buyer's bank lends 80% of value 598.4

Cash the buyer now needs: 850 − 85 − 598.4 = 166.6

The buyer must find nearly twice the planned cash for an apartment worth US$102,000 less than the price. Walking away costs the US$85,000 deposit and may bring a claim from the developer, but a claim against an individual takes time. Suppose three of the eleven do not settle, with the deposits forfeited.

8 settle: 8 × 0.85 × 0.90 = 6.12 43.7% of debt

Forfeited deposits: 3 × 0.085 = 0.255

Total: = 6.375 45.5% of debt

The three units go back on sale, into the market that caused the problem.

// 04 — HOW PRESALES DIFFER FROM A PRE-LET

A presale repays the loan once and then is gone. A pre-let is a lease signed before construction, usually of a commercial building, and it gives the lender a tenant whose rent can service an investment loan after completion. The first answers who will buy; the second answers who will pay rent and for how long.

Presales are read with loan to cost and the contingency. Those measure how much the developer stands to lose and how much cost overrun the budget can absorb. Presales measure how much of the exit already exists, and a project can pass one test and fail another.

DEFINED IN ONE PARAGRAPH → · PROPERTY DEVELOPMENT FINANCE → · THE SUNSET CLAUSE →

// 05 — WHERE IT DECIDES A FILE

The gap between reported and qualifying cover decides how much the bank will lend and when. A presale level is commonly a condition precedent to first drawdown, so a developer short of it can sell more before starting, put in more equity, accept a smaller facility, or look for a lender that asks for less. Issue 08 is that conversation: a developer's sold townhouses fall short of the bank's line in a suburb where prices are slipping.

After approval the contracts need watching. A lender tracks variations, assignments, and any sunset date that falls too close to the programme, since a late finish can hand buyers a way out in the very market that makes them want one. It also reads who the buyers are: several purchases by one investor, or by buyers relying on the same finance, can fail together.

THE DEVELOPMENT LOAN → · ISSUE 08 · THE COURTSHIP →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

Australian Prudential Regulation Authority, Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk — Attachment A, land acquisition, development and construction exposures — Above 5 million Australian dollars to a borrower on one development, a 100% risk weight on residential ADC requires qualifying pre-sales at least equal to total debt — section 02.
Australian Prudential Regulation Authority, APRA clarifies its March 2017 letter regarding commercial property lending, 13 February 2025 — The reference to pre-sales in the 2017 letter does not represent a minimum requirement or expectation of APRA — section 02.
GOV.UK, Buying a home (England and Wales) — An offer is not legally binding in England and Wales until contracts are exchanged — section 02.

// QUESTIONS PEOPLE ASK

What percentage of presales do banks require?: There is no single figure, and the answer varies with the lender, the market, the type of project and the cycle. Some measure cover against debt and others against units. In Australia, APRA noted in 2017 that banks were generally asking for presales of at least 100% of committed debt, and clarified in 2025 that this was not a minimum requirement. Non-bank lenders often accept less, at a higher price and for a loan that carries the difference in risk.
What happens if a presale buyer does not settle?: The developer can usually keep the deposit and claim any further loss from the buyer, subject to the contract and local law, but recovering it from an individual is slow and uncertain. The unit goes back on sale, often in a weaker market. For the lender, the expected repayment does not arrive on the date assumed, so more of the debt rests on unsold stock and the loan runs longer, with interest still accruing.
Who holds the deposit on an off-the-plan sale?: It depends on the contract and the jurisdiction. In New South Wales, for example, off-the-plan deposits must stay in a trust or controlled money account during the contract period, and a buyer may give a bank guarantee or deposit bond instead of cash. Elsewhere the contract and local law decide. A lender wants to know which applies, because a deposit that has already been spent cannot also be counted in the cash that arrives at completion. A buyer has separate reasons for asking the same question.
Can a developer get finance without presales?: Sometimes. A developer can offer more equity, a lower loan against cost, other security or a strong record, and some projects, such as those with a pre-let or a committed buyer for the whole, depend less on individual sales. Non-bank lenders may also be willing to lend with fewer presales at a higher cost. What changes is who carries the risk that the units do not sell, and the price charged for carrying it.

// NEXT TO IT

// ON WHOSE DESK

The seats that read this term in an ordinary week. Each page says what the seat is for, who arrives in it, and the shape of the round it runs.

Credit analystReads a borrower and writes the recommendation a decision-maker will act on.
Credit sanctionerHolds delegated authority and signs — or declines — the lending the front line brings.
Workout and recoveries managerTakes the files that have gone wrong and works out how much the bank gets back, and how.

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.

SIGNAL OR NOISE · THE ECONOMY · COLLATERAL MARKETS

A loan is secured on a specialised cold-store warehouse. Similar warehouses in the region have taken two years to sell.

Signal or noise?

3 MORE ON THE ECONOMY · COLLATERAL MARKETS →WHERE DO YOU READ FROM? THE PLACEMENT →

THE READING ROOMIN ONE PARAGRAPHPresales What are presales, and why does a development lender count them?