Two very different ways to fund a small project
As an individual, with residential construction loans. If you build a duplex or two homes in your own name to keep or sell, ASIC says a loan to an individual to buy land and build dwellings will generally be regulated consumer credit, even across several properties. Lenders then assess you much like any home loan: your income, your other debts and the finished value, with the build money released in progress payments.
As a company or trust, with development finance. Borrowing through an entity for business purposes usually means a development loan assessed mainly on the project: the costs, the end value, the sales plan and your equity. ASIC states loans to companies are not covered by the consumer credit legislation, so the protections and the paperwork are different.
The name the site is bought in affects stamp duty, GST, tax on the profit, which lenders will look at the deal and which rules apply to the loan. Get your accountant and solicitor to advise before you sign the contract.
How the money flows
- Buy the site, with a standard loan or a site acquisition loan if the project is a business venture.
- Get approvals: development approval or complying development, and the subdivision plans.
- Sign a building contract and have the lender value the project on an as if complete basis.
- Draw the construction money in stages as the builder finishes each part of the work, with interest charged only on what has been drawn.
- Subdivide and register the new titles, then sell, refinance to keep, or a mix of both.
Plan the exit from day one
Lenders want to know how the loan is repaid. If you plan to sell, they look at the end values and how quickly similar homes sell nearby. If you plan to keep one or both, they assess whether you could refinance the finished homes into investment or home loans. Many small developers sell one and keep one, which needs both plans to work.
If sales are slower than expected, a residual stock loan could repay the construction loan while you sell the rest, at a cost.
GST and tax
Building new homes to sell is usually treated as a business activity: GST generally applies to the sale of new residential premises, and buyers generally withhold it at settlement and pay it to the ATO. Building to keep is treated differently. Your accountant should model both before you commit, because GST and income tax change the profit and the cash you need.
Common questions
Could I use a normal construction loan for a duplex?
Often, yes, if you build in your own name and lenders accept the plan for the finished homes. Lenders assess your income and the finished value, and release the money in progress payments as the build goes up.
Do I need development finance for a three lot subdivision?
Not always. Small projects are sometimes funded with residential lending in your own name, and sometimes with development finance through a company or trust. It depends on the size, your plans for the finished lots or homes, and your structure.
Could I keep one townhouse and sell the others?
Yes, it is a common plan. Lenders need to see that the sales repay enough of the debt and that you could refinance the one you keep into a long term loan.
Sources
- ASIC: FAQs, does the credit legislation apply?, checked 26 October 2026
- ATO: GST at settlement (new residential premises and potential residential land), checked 26 October 2026
- ATO: GST and the margin scheme, checked 26 October 2026
General information only, not credit advice. It doesn’t take your objectives, financial situation or needs into account. Rules and figures change; check them, or talk to Joshua, before you rely on them.