Category: New Builds

Progress Payments: What Lenders Look for in Drawdown Requests

When it comes to property development and construction finance, progress payments form the backbone of how funds are advanced throughout a project. For lenders like ASAP Finance, this is one of the most critical aspects of loan management – ensuring funds are released only as value is created on site, and almost always on a cost-to-complete basis.

The Basics of Progress Payments

A progress payment (or “drawdown”) refers to the staged release of loan funds throughout the construction or subdivision process. Rather than advancing the entire facility upfront, funds are released progressively as the project reaches agreed milestones. Note, payments are almost always made on a cost-to-complete basis (which we’ve covered in a previous blog).

This structure ensures borrower equity is applied first to the project and that the lender’s loan facility is sufficient to complete the project.

What Lenders Look for in Drawdown Requests

Every drawdown request is assessed on a simple principle: “after paying the DD request, is the amount being retained by the lender sufficient to complete the project?”.

While there are a range of other considerations when making a payment, the lenders final decision will eventually tie back to that fundamental question.

Consideration for Lenders:

Before approving a drawdown, prudent lenders will typically consider the following. In most cases, an independent Quantity Surveyor (QS) report will also be required, which addresses many of these points in greater detail.

• Budget review – the lender will review the full project budget to identify any areas where cost increases are known or anticipated. The aim is to ensure that after the requested payment is made, the lender remains sufficient funds on a cost-to-complete basis. This includes confirming appropriate allocation of contingency sums and factoring in forward-looking costs that may not have been fully identified early in the project.
• Evidence of progress: the lender may go to site or request photos confirming works done.
• Invoices from the main contractor and relevant subcontractors: for the raw build, some lenders may not require individual subtrade invoices and instead pay per the agreed milestones (however a QS will almost certainly ask for sub trade invoice and confirmation that all previous invoices have been paid)
• Program – lenders will assess whether the project remains on track against the approved program. Delays often translate directly into increased costs, this is because capitalised interest and fees form part of the overall funding facility and budget. If the revised completion date extends beyond the original term of the loan, the lender may require evidence that the borrower can cover any resulting shortfall, which may include an additional equity injection.
• Council inspection signoffs: Evidence that key council inspections have been passed, such as drainage, pre-line, or pre-roof stages. These provide independent verification that works completed on site meet the required building standards and align with the approved plans.
• Cost over-runs: If a drawdown request exceeds the value of the completed work, the lender may only approve a partial payment. This protects the lender from over-exposure if delays, defects, or cost overruns occur later in the build.

Lastly, expect your lender to undertake a site visit. Site inspections are an important step, providing a real-world check against what’s claimed on paper. They also give the lender valuable insight into the quality of workmanship and general site activity. A well-organised, active site signals good project management, while disorganisation or inactivity can indicate emerging risks, unpaid bills or potential delays.

Council Inspections

Council inspections play a critical role in the progress payment process, serving as an independent safeguard for both lender and borrower. Each passed inspection verifies that the works completed meet building code requirements.

In a residential build, inspections typically cover key stages such as foundations, framing, and pre-line etc. while subdivision elements focus on civil works such as earthworks, utilities connections, retaining, drainage and driveway (including vehicle crossing) sign offs.

These inspections provide independent assurance that all works are compliant and completed in line with approved plans. They also help confirm there are no outstanding remedial items that could undermine the project’s cost-to-complete position or the security of the loan facility.

Greenfield Land Subdivisions

Subdivision funding carries its own complexities and is worth highlighting separately. Unlike infill projects, where subdivision works are relatively minor and progress can be tracked through defined structural stages, greenfield projects centre on extensive civil and infrastructure works.

Because of this, milestone-based drawdown structures are often impractical. Lenders instead rely on engineering certificates and supporting invoices to verify progress and authorise drawdowns. Given the scale and variability of such works however, QS reporting is almost always required to maintain oversight and cost control.

ASAP’s Milestone-Based Approach

Unlike traditional banks, ASAP Finance does not require a QS report to fund most projects. Instead, we take a pragmatic, milestone-based approach that streamlines the process without compromising oversight.

Our progress schedule is typically structured around clear, definable stages such as foundation, framing, roof on, lock-up, interior completion and so on. Each milestone would correspond to a known percentage of total build cost, making it easier for developers and builders to forecast cashflow and align payments with real progress.

By removing the QS requirement, projects move faster and incur fewer third-party costs, while still maintaining robust checks and balances through council inspection reports and site verification.

Why Lenders Take It Seriously

A disciplined drawdown process is about more than compliance – it’s about protecting project viability. By linking payments directly to verified progress and the project’s broader cost-to-complete position, developers maintain stronger control over cashflow, lenders safeguard their exposure, and projects stay on schedule.

ASAP Finance’s milestone-based model strikes the right balance between efficiency and oversight, ensuring funds are advanced promptly while maintaining the integrity and financial stability of the project.

Conclusion

At ASAP Finance, we view progress payments as prudent management, not an administrative step. Each drawdown is carefully assessed to ensure the project remains in a full cost-to-complete position – protecting momentum, minimising risk, and keeping developments moving forward with confidence.

New Builds are Gaining Ground with Property Investors Again

New builds are becoming an increasingly attractive option for property investors in New Zealand. With lower deposit requirements, exemptions from Reserve Bank restrictions, and strong demand for modern housing, it’s no surprise they’re gaining momentum again.

At ASAP Finance, as a specialist development lender, we’ve seen a surge in property development funding requests for new projects as both developers and investors move to take advantage of the current landscape. This article explores why new builds are getting attention and how you can leverage the trend.

Why Investors Are Choosing New Builds

The main reason investors are choosing new builds is the ease of securing funding. Lower deposit requirements and exemptions from LVR and DTI restrictions make them particularly attractive.

Under current Reserve Bank of New Zealand (RBNZ) loan-to-value ratio (LVR) rules, investors need a 35% deposit for existing properties. New builds, however, benefit from a carve-out in the BS19 framework which exempts them from both LVR and proposed debt-to-income (DTI) limits. In practice, this means there are no formal restrictions on leverage for new builds. Instead, banks apply their own policies – typically requiring a 10–20% deposit and capping lending at 80–90% LVR.

This carve-out specifically covers construction lending. It applies when a borrower is building a new home, purchasing a newly built home from a developer within six months of completion (often referred to as buying “off the plans”), or purchasing through the Government’s KiwiBuild programme. These situations fall within the exemption, giving lenders greater flexibility and investors more accessible leverage.

Furthermore, banks often provide more favourable incentives for new builds as well. These can include discounted rates (ANZ currently offers 0.60% off fixed and 1.25% off floating under their blueprint to build product), cashbacks of up to 1% from major lenders (ANZ, ASB etc), and green build incentives, including extra discounts and products for energy-efficient homes.

While the era of 1.99% mortgages is gone, new builds continue to benefit from competitive pricing, with floating rates for eligible borrowers around 5% depending on profile.

Where Are the Opportunities?

For property developers focused on the investor market, infill developments , particularly townhouses and terraces in established centres like Auckland, Hamilton, and Christchurch – remain the most in-demand product. Investors are looking for well-located, low-maintenance properties that appeal to tenants and deliver steady yields. This means product selection and design need to be geared towards what investors value most. Key considerations include:

• Transport connectivity – close to arterial routes, motorways, and public transport for commuting tenants
• Tenant appeal – proximity to employment hubs, education providers, and retail amenities
• Design efficiency – practical layouts, low-maintenance materials, and compliance with Healthy Homes standards
• Rental return – balancing build cost against achievable rents in the area
• Market absorption – ensuring supply levels of similar stock are not oversaturating the suburb
• Investor affordability – price points that fit within common investor LVR/deposit requirements
• Exit strategy – stock that can be sold down easily to multiple smaller investors, rather than requiring one large purchaser

Greenfield developments also present opportunities, especially in high-growth corridors like Rolleston, Pokeno, and Silverdale. However, developers need to carefully assess the target audience. Many greenfield subdivisions are driven by owner-occupier demand, which can leave investor stock harder to shift. Identifying which subdivisions have strong rental demand and investor appetite is critical to project viability.

ASAP Finance provides tailored development finance solutions for both infill developments (townhouses, terraces, and multi-unit projects in established urban areas) and greenfield subdivisions (large-scale residential projects in growth corridors). Our solutions include no-pre-sale construction funding, no valuations required, milestone-based drawdowns (no QS appointment needed), GST facilities, and serviced or capitalised interest options.

What to Watch Out For

New builds are not always the best fit for every investor.

• Limit scope for value-add – new builds offer limited potential for adding value through renovations, subdivision, or development. Most of the upside is already captured by the original developer, leaving future capital gains tied largely to broader market growth.
• Risk of oversupply – Large-scale property developments can flood local rental markets, leading to longer vacancy periods and delayed rental income.
• Over-capitalisation – Not every new build works as a rental. Higher-spec homes often deliver poor yields if the additional cost (or higher purchase price for the home) cannot be recovered through higher rents, leaving investors exposed to weaker cash flow.

In all situations, investors should focus on yield, location, and tenant demand rather than glossy brochures or IM’s.

Are New Builds a Good Investment?

They can be – but it depends on your strategy. If your goal is long-term passive returns, low maintenance, and taking advantage of favourable bank lending incentives, new builds are ideal. If your strategy is value-add, renovation-driven, or short-term flipping, then older properties may be more suitable.

Final Thoughts

The market has shifted. With lower deposit requirements, exemptions from LVR/DTI limits, and better bank lending incentives, new builds have once again moved from a niche play to a mainstream strategy for investors.

If you’re a developer looking to meet growing demand ASAP Finance provides flexible lending criteria with no pre-sales, no QS, and no registered valuations required.

Ready to take the next step?

Contact the team at ASAP Finance for fast, flexible funding tailored to new build projects.