Property Development Finance For Regeneration Schemes

Arranging Property development finance for projects in inner city areas is getting easier as more lenders are waking up to the idea that excellent profits can be made by helping property developers in regeneration areas.

Areas of cities that are run down but in good central location often present good investment opportunities, especially if they are surrounded by more upmarket areas which are already popular places to live. In these regeneration areas property can be found at very reasonable prices, often up to 10% to 20% lower than in the fully developed area of the city.

However investors still need to do some careful research and check there is a well-funded regeneration plan in place. Areas such as Stratford East in London, parts of Manchester and inner city areas of Bristol all have regeneration schemes in place and are proving irresistible to investors and buyers. A good example of the perfect regeneration project would be an area like Stratford in London with the 2012 Olympics being hosted in the area.

Demand for property development finance in regeneration areas is exceeding all records with property developers eagerly snapping up brownfield sites. It is far easier to develop a brownfield site than to try and get planning permission on greenfield sites. The location of brownfield site makes property development funding more attractive as they are already in prime locations for amenities such as shops, cinemas, bars and employment.

Planing restrictions on greenfield sites means that regeneration is the way forward. Finance for property development in these areas is very often geared to the expected increase in value once the whole site has been finished. Although far more care is taken by the lender when researching the risk involved in this type of property development. Thorough investigation of the local regeneration plan will be carried out by the lender to ensure the project falls within the local planners requirements.

Mortgage lenders have improved their product offerings to accommodate the inner city type of property, this includes helping property developers arrange mortgages for residential dwelling situated above commercial premises. In particular the buy-to-let mortgage has really come into its own in this environment. It is not unusual to see an entire development of apartment being snapped up by investors before the project is even ready for viewing.

When researching the property development finance options available it is vital that the builder tries to use a specialist broker. The mainstream residential mortgage broker is sometimes tempted to dabble in commercial finance, usually attracted by the idea of large commissions. In reality arranging finance for property development is a highly skilled job, and relies on experience and personal contacts. Property developers trying to arrange finance for regeneration projects are also well advised to try to use local brokers wherever possible, this is because a local broker is more likely to know of any regional issues which may adversely affect the project.

Central government funds, the EU and local authorities all often try to encourage regeneration schemes with subsidies and grants. Very often a scheme will be enhanced by the provision of improvements to local schools, hospitals and transport links. In order to capitalize on positive publicity there will often be some media interest in these announcements, it is worth following these stories carefully.

Bridging finance is another tool for the developer to use, particularly useful if property development finance can not be raised because of planning problems. Bridging lenders can help fund the purchase of a site prior to planning permission being granted. The developer can then take advantage of the increased value when arranging the property development mortgage.