ABSTRACT
This chapter examines the different sources of finance available to developers and discusses the various methods of financing a development scheme via worked examples. The majority of property developments can only be undertaken with the assistance of funding from an external third party source. This third party provider is most often a lender/financier, institution or syndicate with funds to lend in return for interest on the capital plus administration costs. In many countries the clearing and merchant banks have been providers of short-term development finance where long-term investment finance was provided by financial institutions and property investment companies. A ‘financial institution’ or ‘financier’ are the generalised terms used in the property and real estate industry to describe pension or superannuation funds, insurance companies, life assurance companies, investment trusts and unit trusts. One of the main reasons why an institution would initially enter the property investment market is because property represents a ‘hedge against inflation’.
