Predevelopment Finance: Why the Most Important Decisions Happen Before You Build

In property development, much of the attention is naturally focused on construction. It is the visible part of the process, the machinery on site, the buildings rising from the ground, the progress that people can physically see.

But experienced developers understand that many of the most important decisions happen well before construction ever begins, before anyone sets foot on the site!

In reality, the success or failure of a development project is often determined during the predevelopment phase, the period where land is assessed, feasibility is (stress) tested, risks are identified, and funding structures are established.

The video below explores why early planning, disciplined assessment and realistic decision-making have become increasingly important in today’s development market.

That early engagement is becoming increasingly important. The New Zealand development market of 2026 is very different from the market many developers experienced several years ago. Construction costs remain elevated, consenting timeframes are longer, finance is more selective, and the property market itself has become more challenging, cautious and price sensitive.

In this environment, the traditional approach of securing a site first and “working the rest out later” has become far riskier.

Why Early Advice Matters More Than Ever

One of the key themes emerging from Cressida Capital’s approach is that funding should not simply be viewed as the final step in a project. Instead, it should form part of the project strategy from the very beginning.

Lending Manager Andrew Stevenson describes this as understanding the development lifecycle in its entirety: “It’s about understanding the project from the inception stage right through to the exit.”

That philosophy reflects a broader shift in the lending environment. Increasingly, lenders are not just assessing whether a project can be funded today, they are assessing whether the project is likely to remain viable over the next 12 to 24 months as conditions evolve.

This is where early-stage planning becomes critical.

Naomi explains that one of the benefits of involving funders early in a project is the ability to “sense check” them before major commitments are made: “If Cressida is brought in earlier, we can do a sense check, because what might have worked two years ago may not work today.”

That observation is particularly relevant in a market that has changed rapidly. Many assumptions that previously underpinned development feasibility, such as build costs, sales values, interest rates, and delivery timeframes, are no longer as predictable as they once were.

As a result, experienced developers are increasingly spending more time stress-testing projects before they commit significant capital.

The Risks That Exist Before Construction

One of the most misunderstood aspects of development finance is where the real risk sits. While construction itself carries risk, many of the most significant risks emerge earlier in the process.

“A lot of the risk sits before you even get to construction, in the consenting and planning stage,” says Andrew.

This is where projects can lose time, incur unexpected costs, or discover constraints that materially affect feasibility.

According to Cressida Capital, some of the most important early considerations include practical site-related issues that are often overlooked in the excitement of acquiring a development opportunity.

Senior Lending Manager, Warren Law notes that developers need to carefully assess matters such as site access, infrastructure servicing, and land contour before proceeding: “Early considerations are things like access to the site, services like wastewater and stormwater, and the contour of the land.”

These issues may sound technical, but they can have major cost implications. Wastewater upgrades, stormwater infrastructure, retaining requirements, foundation complexity, or restricted access can materially change the economics of a project.

At the same time, broader location factors remain critically important. Naomi points out that development success is not simply about achieving density or maximising yield: “It’s not just about the numbers, location and what works in that suburb are just as important.”

That includes understanding local demand drivers such as schools, transport links, retail amenity, competing developments, and the type of product that buyers in a particular area are actually seeking.

A project may work well on paper, but if the end product is not aligned with the market, the exit strategy can quickly become compromised.

The Most Common Feasibility Mistakes

Feasibility modelling remains one of the most important and most misunderstood aspects of property development.

According to Cressida Capital, one of the areas where projects often go wrong is overestimating end values: “The most common mistake is overestimating what the end product will sell for,” says Andrew.

In stronger markets, optimistic assumptions may still allow projects to succeed, but in softer or slower markets, inflated sales expectations can create significant pressure later in the project lifecycle.

At the same time, many developers remain too focused on direct build costs while underestimating the impact of soft costs. Naomi explains that these costs can accumulate quickly and materially affect overall project viability: “A lot of developers focus on build costs but overlook soft costs like holding costs, council contributions and finance costs.”

Legal fees, engineering costs, architect fees, inspection fees, finance interest, consent costs, and consultant costs all contribute to the overall project equation. Individually they may appear manageable, but collectively they can materially reduce margin if not properly accounted for.

Another critical issue is contingency.

Warren notes that many developers continue to budget using best-case assumptions, rather than allowing for uncertainty: “People often budget on best-case pricing, but they really need to look at the worst-case scenario and see if it still works.”

In practice, contingency allowances of 5–10% are often required, depending on the complexity of the site and the project itself. Factors such as slope, foundation requirements, service infrastructure, and geotechnical conditions can all create unforeseen costs during delivery.

The key point is that a feasibility should not simply demonstrate how profitable a project could be under ideal conditions. It should demonstrate whether the project can still survive if conditions become more difficult, again, stress testing the project fundamentals.

The Importance of Time

One of the biggest challenges in the current environment is time.

Consenting processes that may once have taken several months can now extend to nine or even twelve months, particularly for more complex developments. During that time, developers continue carrying holding costs, finance costs, rates, insurance, and consultant fees.

This is why timing assumptions have become increasingly important within feasibility analysis.

Developers also need to consider what happens if projects do not progress as expected. Having a “Plan B” has become a critical part of responsible project structuring.

That may include:

• Holding the property longer-term
• Adjusting staging
• Redesigning the product mix
• Refinancing the site
• Delaying construction until conditions improve

The projects most vulnerable in today’s market are often the ones built around highly optimistic timelines with limited flexibility.

Why Demolition Timing Matters

One of the more practical pieces of advice highlighted by Cressida Capital relates to demolition.

In many cases, developers move too quickly to remove existing improvements from a site before consents are secured.

Andrew suggests that patience can often create both financial and strategic advantages: “Don’t rush to demolish, a property is often more valuable with a house on it, and it can provide holding income while you’re working through consents.”

That holding income can help offset financing costs during what may become an extended planning period. It also preserves optionality if consent outcomes change or market conditions soften.

Again, this reflects a broader principle underpinning Cressida Capital’s approach: preserving flexibility wherever possible.

Building the Roadmap Before the Build

At its core, predevelopment finance is not simply about obtaining funding for a site purchase or early-stage costs. It is about creating a realistic roadmap for the entire project.

That includes understanding:

• Whether the site works
• Whether the numbers are realistic
• Whether the market demand exists
• Whether sufficient contingency is in place
• Whether the exit strategy is achievable

Naomi summarises this clearly in the closing of the video: “At Cressida, we help developers build a roadmap from acquisition through to exit, making sure the project works before they commit.”

That mindset has become increasingly valuable in a more cautious and disciplined development environment.

The reality is that many project problems do not begin during construction. They begin much earlier, through unrealistic assumptions, insufficient planning, poor site assessment, or inadequate feasibility analysis.

By the time construction starts, many of those decisions have already been locked in, they say you “can’t build your way out of a bad project”.

Which is why, in today’s market, the projects most likely to succeed are often not the projects that move the fastest, but the projects that are the best prepared before the first sod is ever turned.