How is land equity credited as deposit, and what valuations and LTV caps apply from land to term?
Land you already own is credited as equity at its current market value if you have held it for about 12 months or more, and at the lower of cost and value if bought more recently. That equity counts towards the development lender's cost cap, so a site worth £800,000 with planning, owned outright, usually means no cash equity at all on a facility sized at 85% to 90% of cost and 65% to 70% of GDV. Three valuations happen along the way, and each stage has its own cap.
By Dominic Whitecross, Co-Founder, HyLend. Last reviewed October 2026.
The three stages, their valuations and their caps
| Stage | Valuation needed | LTV cap | What the lender is pricing |
|---|---|---|---|
| 1. Land loan or land bridge | Site value with or without planning; hope value usually excluded | 50% to 65% of site value; up to 70% with planning | Planning risk, exit onto a development facility |
| 2. Development facility | Residual site value plus GDV (RICS Red Book, with cost plan); monitoring surveyor reports through the build | 85% to 90% of total cost and 65% to 70% of GDV, lower figure applies | Build cost, programme, sales risk |
| 3. Term or exit | Investment value of the completed units (or 90 day value on an exit bridge) | 60% to 75% of completed value depending on asset and income | Rental cover or sale evidence |
How the land equity is credited
Development lenders size the facility on total cost: land plus build plus fees plus finance. Your equity is whatever part of that cost you have already paid or own. If the land is worth £800,000 and unencumbered, the lender treats £800,000 of the cost as funded by you. On a £3m total cost scheme, a 90% loan to cost facility is £2.7m, which means £300,000 of equity is needed; the land covers it with room to spare, so the facility can fund 100% of the build.
The 12 month rule is about evidence. Land held for a year or more is credited at the valuer's current figure, including the uplift from planning you obtained. Land bought in the last few months is credited at the lower of price and value, so a quick purchase and planning gain is not counted until it has seasoned, unless the planning was obtained by you and the lender accepts the planning uplift on evidence. Development finance equity in detail →
Worked example
Site bought for £500,000 two years ago, now valued at £800,000 with planning for six houses. Build cost £1.6m, professional fees £150,000, finance and contingency £250,000. Total cost £2.8m; GDV £3.9m.
Cost cap at 90%: £2.52m. GDV cap at 65%: £2.535m. The cost cap binds at £2.52m. Equity required: £280,000. Land equity credited: £800,000. Cash equity required: none, and the facility funds the entire build and fees. The peak drawn balance, not the facility, drives the interest bill, which the free cash flow template models month by month. Development cash flow appraisal template →
Where it goes wrong
Land with a loan on it: the existing charge has to be repaid from the development facility, which eats the equity credit. Land bought in the last six months at a price above the valuer's figure: credited at the lower figure and the gap needs cash. Planning obtained by someone else: the uplift is in the price you paid, not in your equity. And a facility that passes the cost cap but fails the GDV cap because sales values are optimistic; the lender's valuer, not yours, sets GDV. Planning the exit before you draw →
How we place it
We structure the three stages as one plan from the start: a land loan that is sized to be refinanced by the development facility, a facility that credits your land at the right figure, and a term or sale exit the facility's own lender has already accepted. Separate lenders at each stage is normal; separate plans is where deals fail.
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Land equity and deposit: FAQs
Does land I own count as a deposit for development finance?
Yes. Unencumbered land is credited as equity at current market value if held for about 12 months, otherwise at the lower of cost and value. It counts towards the loan to cost cap in place of cash.
What valuations are needed from land to completion?
A site valuation for the land loan; a residual land value and GDV report with cost plan for the development facility, plus monitoring surveyor reports during the build; and an investment or 90 day valuation of the finished units for the term loan or exit bridge.
What are the LTV caps at each stage?
Land: 50% to 65% of site value, up to 70% with planning. Development: 85% to 90% of total cost and 65% to 70% of GDV, lower figure applies. Term: 60% to 75% of completed value.
Can I get 100% development finance if I own the land?
Often, in the sense that the facility funds 100% of build and fees because the land covers the equity requirement. The facility still cannot exceed the cost and GDV caps.
What if there is a loan on the land?
The development facility repays it on day one, so the equity credited is the land value less that loan. A land bridge at 60% LTV leaves 40% of site value as equity, which is usually still enough.