Propsult reality

How to Finance Property Development in Nigeria

Reading Time: 8 minutes

Table of Contents

For many property developers, no matter how experienced they may be, the prospect of sourcing funding for their next development scheme can elicit any number of negative emotions. The lending landscape is always changing, the due diligence process is long and can be arduous and valuations are often a minefield. 

So you’ve got the vision for a groundbreaking development project. But how do you turn that vision into reality?  Financing is the fuel that propels your project forward. Embarking on a property development journey is both exhilarating and complex. Central to the success of any venture is securing the right financing. 

Keys Takeaways: 

  • Lenders consider factors like loan-to-value ratio (LTV), your track record, and the overall feasibility of your project.
  • Construction loans are the backbone of most development projects. These loans cover the costs of land acquisition, construction, and other development expenses.
  • Partnering with investors can provide essential equity for your project. Investors contribute capital in exchange for a share of the profits. 
  • A solid development plan and a strong track record are essential for securing financing. 

What is property development finance?

Naturally, investors need to provide developers with working capital to begin the process of development. This usually happens in the form of short-term, high-interest loans from banks or other non-bank lenders. There are very few investors who can, or want to, fund a development upfront without relying on finance.

Subscription Form
Subscribe for exclusive insight into Lagos real estate and Investment opportunities
Please enable JavaScript in your browser to complete this form.

There is not a one-size-fits-all approach when it comes to financing property developments, and knowing your borrowing capacity, your project, and timeline and being aware of major rules and regulations is key in a successful finance strategy. What loan product is best suited for your development will largely depend on your project plan and feasibility, as well as the assessment criteria for various finance products.

Types of Development Finance

Development Finance facilities can vary greatly and with them, the appropriate type of development finance loan varies to suit. Here are some examples of types of development finance: 

Construction Finance

For those looking to build new properties or developments from the ground up, construction finance provides the necessary capital for every stage of the project. From land acquisition to project completion, this financing option ensures seamless progress and efficient use of funds.

Refurbishment Finance

Renovating existing properties to enhance their value? Refurbishment finance supports property upgrades, renovations, and improvements. Whether it’s a residential property, commercial space, or mixed-use development, this finance streamlines your refurbishment plans.

Conversion Finance

Converting properties from one use to another, such as turning office space into residential units or transforming a warehouse into a creative hub, requires specific funding. Conversion finance caters to these projects, ensuring smooth transitions and optimized financial support.

Development Finance

For those focused on unlocking the potential of land by obtaining planning permission for new developments, land development finance provides the necessary capital. It covers the costs associated with obtaining approvals, infrastructure development, and preparing the land for construction.

How does property development finance work?

Property development finance works by being issued in set stages in line with the development project(s). Development finance loans work by having funds paid out to you in drawdown stages as your property development project progresses, known as ‘tranche drawdowns’. In most cases, lenders will carry out periodic re-inspections of the site before each payment is made, similar to a self-build mortgage.

The amount of money you can borrow depends on the type of project, the expected gross development value (GDV), and the loan-to-value (LTV) or loan-to-cost (LTC) ratio. The GDV is the estimated value of the property once the development is completed, while the LTV is the percentage of the GDV that the lender is willing to lend. The LTC is the percentage of the total cost of the project that the lender is willing to lend. Typically, lenders will offer up to 70% of the GDV or up to 90% of the LTC, whichever is lower.

The interest rate and fees for property development finance vary depending on the lender, the project, and the borrower. Generally, the interest rate is higher than a standard mortgage, ranging from 6% to 18% per annum. The interest can be paid monthly, rolled up, and paid at the end of the loan, or deducted from the loan amount at the outset. The fees may include arrangement fees, exit fees, valuation fees, legal fees, and broker fees.

The duration of property development finance is usually between 6 and 24 months, depending on the scale and complexity of the project. The loan is repaid either by selling the property or by refinancing it with a long-term mortgage.

How Developers Fund and Borrow Finance for Property Development

It’s worth noting that the choice of funding source often depends on the scale of the project, the developer’s creditworthiness, and the prevailing market conditions. Developers may combine multiple funding sources to meet their capital requirements. Developers typically raise funds for their projects through various means, including:

Bank Loans

Developers often approach commercial banks and mortgage lenders for construction loans or development loans to finance their projects. Some banks that commonly provide such loans in Nigeria include: First Bank, Guaranty Trust Bank, Zenith Bank, Access Bank, Fidelity Bank, etc 

Private Equity/Venture Capital

Developers may seek funding from private equity firms or venture capitalists who invest in real estate projects in exchange for equity or a share of the profits.

Off-Plan Sales

As you mentioned, developers can raise funds by selling properties off-plan, where buyers pay upfront for units that are yet to be built. This method provides developers with the necessary capital to commence construction.

Retail Investor Schemes

Some developers, like Sujimoto Group, have adopted strategies where they collect funds from individual investors, promising them returns on their investments after a specified period. This approach allows developers to raise funds from the general public.

Joint Ventures/Partnerships

Developers may enter into joint venture agreements with other companies or high-net-worth individuals, where each party contributes resources (financial or otherwise) to the project.

Real Estate Investment Trusts (REITs)

Developers can raise funds by creating REITs, which are companies that own and operate income-producing real estate assets. Investors can purchase shares in the REIT, providing developers with capital.

Government/Institutional Funding

In some cases, developers may seek funding from government agencies or institutional investors like pension funds or sovereign wealth funds, especially for large-scale or public-private partnership (PPP) projects.

National Mortgage Banks

Developers can also partner with national mortgage banks, such as the Federal Mortgage Bank of Nigeria (FMBN), to access financing for housing projects.

What can development finance be used for?

Development finance acts as the fuel for various projects that involve creating or improving properties. Here’s a breakdown of some key uses of development finance:

Residential property

Development finance may be used to build one or more houses, convert an office block or retail unit into houses/flats, build an apartment block or renovate a residential property. This can be used by developers looking to sell or rent the property.

Commercial property development

Used to build or convert properties that can be used for offices, retail, and leisure – including mixed office and retail. Lenders do prefer to have a pre-let in place on commercial development to maximize the loan to offer. However, some will consider without this.

Refurbishment projects

Light redevelopment /refurbishment properties which include aesthetic and non-major structural are better suited to alternative short-term funding such as bridging finance which Aria can also help you with.

Land Acquisition and Conversions

In some cases, development finance can be used to help purchase the land upon which a property project will be built. Development finance can also be used to fund the conversion of existing buildings into new uses. For example, converting an office building into apartment.

Key Considerations in Financing Property Development

As developers explore financing options, several critical considerations come into play. Understanding these factors is essential for making informed decisions and mitigating risks:

Risk Assessment and Feasibility Studies

Before pursuing financing, developers must conduct comprehensive risk assessments and feasibility studies. This involves evaluating market conditions, project viability, and potential challenges. Identifying and mitigating risks early in the process enhances the project’s chances of success and reduces financing uncertainties.

Loan-to-Value Ratios and Interest Rates

Loan-to-value (LTV) ratios and interest rates significantly impact the cost of financing and overall project economics. Developers must carefully analyze LTV ratios to determine the amount of funding available relative to the property’s value. 

Likewise, understanding prevailing interest rates and market trends helps developers negotiate favorable terms and manage financing costs effectively.

Legal and Regulatory Considerations

Navigating legal and regulatory frameworks is critical in property development financing. Developers must adhere to zoning regulations, permitting requirements, and compliance standards set forth by local authorities. 

Failure to address legal and regulatory considerations can lead to project delays, penalties, and reputational damage. Partnering with legal experts ensures compliance and mitigates legal risks throughout the financing process.

Step-by-Step Guide to Securing Property Development Financing

Securing property development financing requires careful planning and execution. Here’s a step-by-step guide to help developers navigate the process effectively:

Developing a Comprehensive Business Plan

Begin by crafting a detailed business plan that outlines your project’s objectives, timelines, and financial projections. Your plan should articulate the project’s scope, target market, competitive analysis, and revenue forecasts. 

A well-defined business plan not only attracts potential lenders but also serves as a roadmap for project execution.

Building a Strong Financial Profile

Lenders evaluate your financial profile to assess your creditworthiness and ability to repay loans. Strengthen your financial profile by maintaining a healthy credit score, reducing debt-to-income ratios, and increasing cash reserves. 

Providing transparent financial statements, including income statements, balance sheets, and cash flow projections, instills confidence in lenders and investors.

Common Challenges and How to Overcome Them

While securing property development financing offers numerous opportunities, it also presents challenges that developers must navigate effectively. Here are common hurdles and strategies for overcoming them:

Financing Hurdles

Challenges such as stringent lending criteria, market volatility, and regulatory complexities can impede financing efforts. Developers must anticipate potential hurdles and proactively address them through thorough due diligence, risk mitigation strategies, and alternative financing options.

Mitigating Risks

Effective risk management is essential in property development financing. Developers should conduct comprehensive risk assessments, diversify funding sources, and establish contingency plans to mitigate financial, market, and operational risks. 

Engaging with industry experts, legal advisors, and financial consultants can provide valuable insights and support in navigating complex financing landscapes.

Adaptability and Resilience

In the dynamic real estate market, adaptability and resilience are key attributes for successful developers. Embrace change, stay informed about market trends and regulatory developments, and remain agile in adjusting financing strategies as circumstances evolve. 

By fostering adaptability and resilience, developers can weather uncertainties and capitalize on emerging opportunities in the ever-evolving financing landscape.


Property development finance is a useful tool for property developers, investors, and landlords who want to undertake large-scale building or renovation works. It works by providing funds in stages, based on the value of the property on completion. It has many benefits, such as allowing you to take on bigger and more profitable projects, but also some drawbacks, such as being more complex, risky, and expensive than other forms of finance. 

While challenges may arise, proactive risk mitigation strategies and adaptability are key to overcoming obstacles and achieving success in property development projects. With careful planning, strategic decision-making, and a resilient mindset, developers can unlock the doors to lucrative opportunities and create lasting impact in the real estate industry.


What are the common financing options available for property development projects in Nigeria?

In Nigeria, property developers have access to various financing options, including bank loans, private investors, real estate crowdfunding platforms, and government grants or incentives. Bank loans are commonly used for property development, but developers can also seek funding from private investors or participate in crowdfunding campaigns to raise capital for their projects. 

How can I determine the best financing option for my property development project in Nigeria?

Selecting the most suitable financing option for your property development project in Nigeria requires careful consideration of factors such as project size, timeline, risk tolerance, and funding requirements. Evaluate the terms and conditions of each financing option, including interest rates, repayment terms, and eligibility criteria. Consider consulting with financial advisors or real estate professionals to assess the feasibility and suitability of different financing options based on your specific project goals and financial circumstances.

What steps should I take to secure financing for my property development project in Nigeria?

Securing financing for a property development project in Nigeria involves thorough preparation and strategic planning. Start by creating a comprehensive business plan and financial projections to present to potential lenders or investors. Research and identify suitable financing sources, such as banks, private investors, or crowdfunding platforms, and prepare a compelling project proposal outlining the investment opportunity and potential returns. Build strong relationships with financing partners, demonstrate your expertise and track record in property development, and be prepared to negotiate terms and conditions to secure the funding needed for your project.

Get Expert Advice on Lagos Property Market

Are you an Home-buyer, New or experienced investor? Get your tailored success strategy with a FREE consulation! Book now and unlock your potential!


Get all of our latest real estate tips delivered straight to your inbox.

Please enable JavaScript in your browser to complete this form.
Open chat
Hi there 👋
How can we help you?