Development Lending Activity Jumps 16.6% — And One in Four Latest Facilities Is Going Into Newly Formed SPVs

Development finance activity accelerated during the first half of 2026, while newly incorporated companies continued to secure a meaningful share of lending. For developers, the figures challenge two persistent assumptions: that development capital has broadly retreated from the market and that creating a new SPV for a project automatically makes borrowing difficult.

UK development lending activity increased materially during the first half of 2026, according to new analysis from Construction Capital. Its Development Lending Monitor identified 32,529 new secured facilities in H1 2026 among lenders active in the development market, representing a 16.6% increase year on year. Activity was also strikingly consistent across the period, with 16,191 facilities identified in the first quarter and 16,338 in the second. Around 35 lenders registered at least three facilities during the latest quarter, suggesting that the increase was not simply the result of one unusually active institution.

The figures are important because they provide an observable measure of secured lending activity rather than another isolated lender case study. They do not tell us that development finance has suddenly become easy, nor do they establish how many pounds were advanced, because Companies House no longer records individual loan values within charge registrations. What they do show is a market in which a substantial number of secured development facilities continue to be created and in which activity has increased compared with the same period last year.

The New SPV Figure Is More Important Than It First Appears

The most commercially interesting finding is not simply the increase in overall activity. Construction Capital found that 24% of facilities in the latest quarter were secured against companies incorporated within the previous 12 months. In property development, that matters because it is common for an experienced developer to create a separate special purpose vehicle for each project. The borrowing company might therefore be only a few weeks old even when the people behind it have completed numerous developments over many years.

This is an important distinction for developers who are told, or simply assume, that a newly incorporated company will make finance difficult. Development lenders are generally interested in far more than the age of the legal entity. They will look through the SPV to the underlying sponsors and assess their experience, financial strength, equity contribution and record of delivering comparable schemes. They will then consider the project itself: the planning position, purchase price, construction budget, professional team, contractor, projected gross development value, contingency and proposed exit.

A new SPV and a new developer are therefore not the same credit proposition. A company with no historic accounts may be controlled by a sponsor with a substantial development track record and significant liquidity. Conversely, an established company does not make a weak project financeable simply because it has traded for several years. The latest data is useful because it reinforces what specialist lenders have long understood: the substance behind the borrower can matter more than the date printed on its certificate of incorporation.

Why Developers Use Project-Specific Companies

Project-specific SPVs are a normal feature of the development market because each scheme has its own ownership, borrowing, construction contracts, risks and eventual disposal strategy. Housing a development within a separate company can make those relationships clearer and allow the lender's security package to be focused on the relevant project. Investors or joint-venture partners can also participate at the project-company level without necessarily becoming involved in the developer's wider group.

The appropriate company and tax structure should always be considered with qualified legal and tax advisers, rather than being designed solely around a lender's requirements. From a finance perspective, however, recent incorporation does not automatically create the obstacle that some borrowers expect. The more important issue is whether the lender can clearly understand who owns and controls the SPV, where the equity originates, what experience the principals bring to the scheme and how the development will be delivered and repaid.

First-Time Developers Face a Different Underwriting Question

The 24% figure should not be interpreted as evidence that one quarter of recent development facilities were advanced to completely inexperienced developers. The data identifies the age of the company, not the track record of the people behind it. That distinction is particularly important when assessing whether the figures imply a major loosening of credit standards. They do not.

A genuinely first-time developer is likely to face a more detailed assessment. Lenders may seek greater comfort through a stronger equity contribution, lower leverage or an experienced professional team. Appointing a credible contractor, architect, project manager and quantity surveyor can strengthen the delivery proposition, while a fully consented scheme, robust cost plan, realistic contingency and good local sales evidence can help reduce other areas of perceived risk. Experienced investors moving into development may therefore still have finance options, but the structure and presentation of the transaction become particularly important.

Specialist Development Lenders Are Increasing Activity Too

The underlying lending mix provides another useful signal. Pure-play development lenders increased activity to 470 facilities from 404 in the prior-year period. This matters because specialist lenders form an important part of the market for schemes that do not fit neatly within conventional bank credit policies. Depending on the transaction, they may offer greater flexibility around leverage, borrower structure, drawdowns or the type of development being funded, although that flexibility can come with higher pricing.

Development finance should therefore not be treated as one homogeneous market. A developer seeking £1 million for a small residential project is not necessarily competing for the same capital as a sponsor raising £20 million for a larger or more complex scheme. Banks, challenger banks, specialist development lenders, debt funds, family offices and private-credit providers can occupy different parts of the market, with appetite varying according to geography, asset class, scheme size, sponsor experience, leverage and exit strategy.

For borrowers, the practical implication is that the question should not simply be whether "development lenders are lending". The more useful question is which lenders are actively competing for a particular project today, and whether the terms available now are better suited to the scheme than those obtained several months earlier.

Developers With Old Terms Should Consider Retesting the Market

The increase in observed lending activity creates a strong reason for developers to revisit funding terms that were obtained six or twelve months ago but have not yet been drawn. Lender appetite can change materially over that period. A scheme previously offered conservative leverage may now attract additional lenders; pricing may have sharpened; another institution may have increased its appetite for the location or asset class; or a structure that previously required a large equity contribution may now have alternatives.

None of this means that every developer will obtain a better offer. Planning, costs, valuation, sponsor strength and marketability still determine the quality of the underlying credit. But a 16.6% increase in secured lending events is a reasonable prompt to question whether terms produced in a different market should simply be accepted without comparison. For a large scheme, relatively small changes in leverage, fees or the amount of equity required can have a material effect on returns.

The Cheapest Development Loan Is Not Necessarily the Best Facility

Development finance is often compared too narrowly through the headline interest rate. In practice, the economics of a facility are determined by a much wider set of variables. A lender offering a lower margin may require substantially more sponsor equity, impose a lower loan-to-cost ceiling, retain more interest within the gross facility or operate more restrictive drawdown mechanics. Another lender may charge more but provide materially higher leverage, allowing the developer to preserve capital for another project.

That distinction can be particularly important for experienced developers running several schemes simultaneously. Capital committed to one site cannot be deployed elsewhere. A modest reduction in the headline borrowing rate may therefore be less valuable than a structure that reduces the cash equity requirement while preserving an acceptable project margin. The correct comparison is the total capital structure and its effect on both the individual scheme and the sponsor's wider development programme.

Loan-to-Cost and LTGDV Need to Be Read Together

Two development facilities with apparently similar headline sizes can provide very different amounts of usable capital. Most lenders apply constraints against both total project cost and gross development value, and the interaction between those limits can determine how much equity the developer must inject. Interest treatment adds another layer: where interest is retained within the gross facility, the amount actually available for land and construction can be materially lower than the headline loan figure suggests.

This is why comparing term sheets requires more than looking at the maximum facility or advertised LTGDV. The developer needs to understand the net cash available at acquisition, how much equity must be committed before the first construction draw, how future releases are calculated and whether the facility provides enough headroom if costs move during the build. A seemingly generous facility can become restrictive if the mechanics behind it are not aligned with the project's cash-flow profile.

Drawdown Mechanics Can Matter as Much as Pricing

Development loans are normally released in stages as works progress, with a monitoring surveyor assessing the project before further funds are advanced. Lenders can differ significantly in how they administer those releases, including the timing of inspections, minimum drawdown amounts, whether costs are funded in advance or reimbursed and how quickly approved funds reach the borrower.

Those operational details can become critical on an active site. A facility that appears inexpensive on paper may prove costly if slow or restrictive drawdowns force the developer to inject additional working capital or delay payments to contractors. For that reason, the lender's ability to execute the facility should form part of the original credit comparison rather than becoming an issue only after construction has started.

Higher Leverage Can Be Structured in Several Ways

Where conventional senior debt does not provide enough leverage, developers may consider mezzanine finance, stretch-senior lending or other forms of junior capital. Mezzanine debt can sit behind a senior development lender and reduce the amount of sponsor equity required, but it is subordinated and therefore generally more expensive. Intercreditor arrangements also need to establish clearly how the senior and junior lenders rank and what happens if the project encounters difficulties.

Stretch-senior finance can sometimes provide higher leverage through a single lender, avoiding a separate mezzanine facility and reducing intercreditor complexity. Preferred equity or joint-venture capital may provide another solution where additional funding is needed but the senior lender will not support more debt. These structures can involve profit participation, priority returns or some dilution of the developer's economics, so they should be compared against the cost of injecting more equity rather than considered purely as another form of borrowing.

Refinancing Is Already a Meaningful Part of the Market

Construction Capital's title-level analysis also identified 799 apparent development refinance events during H1 2026, where one senior charge was redeemed around the time a successor facility was registered. Although the methodology cannot establish the commercial circumstances behind every transaction, it provides useful evidence that refinancing incumbent development debt is a significant part of current activity.

This has direct implications for developers approaching maturity. Development facilities are short-term loans with defined repayment dates, and an expiry should not be treated as an administrative technicality. Construction programmes can slip, sales can take longer than expected, utility connections or planning conditions can delay completion and a project's original exit timetable can change. The incumbent lender may agree an extension, but that should never be assumed to be the only available or most attractive outcome.

Developers Should Review the Exit Before the Loan Reaches Maturity

A refinancing exercise is generally stronger when it begins months before the existing facility expires rather than during the final few weeks. At that point there is time to obtain a fresh valuation, assess remaining costs, consider completed and unsold units, understand any changes to the sales programme and approach lenders with a coherent explanation of why the refinance is required. Waiting until maturity is imminent can reduce the number of credible alternatives and weaken the borrower's negotiating position.

Development exit finance can also become relevant once construction is substantially or fully complete but units remain unsold. Refinancing expensive development debt into a facility designed for completed stock may provide additional time for orderly sales rather than forcing the developer to accept discounts simply to repay the original lender. The viability of that strategy will depend on completed value, remaining stock, sales evidence, leverage and the lender's assessment of the exit, but it should normally be considered before the development facility reaches its final maturity date.

Rising Redemption Rates Add Another Useful Market Signal

The monitor also reports that 18-month redemption rates have risen across successive cohorts since 2021. A redeemed charge does not tell us precisely how the underlying development loan was repaid: repayment could follow unit sales, a development exit facility, longer-term investment finance or another refinancing event. Nevertheless, the trend is relevant because it indicates that lending activity is not simply accumulating through new registrations; a greater proportion of facilities in successive cohorts are also being satisfied within the observed period.

For lenders, that recycling of capital can support further origination. For developers, it reinforces the importance of planning the full financing lifecycle rather than treating the initial development loan as an isolated transaction. The acquisition facility, construction drawdowns, practical completion, unit sales and any development exit or investment refinance are interconnected stages of the same capital strategy.

The Data Creates Opportunities for Developers and Their Advisers

The strongest commercial opportunity is among developers whose funding assumptions have not been reviewed recently. That includes sponsors who obtained terms more than six months ago, borrowers with development loans expiring during the next six to twelve months, landowners with planning permission but no debt arranged and developers who created a new SPV but have delayed approaching lenders because they believe the company's age will prevent funding. It also includes schemes where the original equity requirement made the transaction unattractive and where higher-leverage structures may now justify another look.

The same discussion is relevant to professional advisers. Accountants are often involved when a project SPV is created and can help clients distinguish between the age of the company and the strength of the underlying sponsor. Quantity surveyors and project monitors may be among the first to identify that a scheme is running beyond its original programme or budget. Planning consultants and land agents can bring finance into the discussion as a site moves from opportunity to consented project, while development solicitors need to understand the proposed capital stack where senior debt, mezzanine, shareholder loans, guarantees or intercreditor arrangements are involved.

Structure Should Come Before Lender Selection

The central lesson from the new figures is not that developers should rush to whichever lender appears cheapest. A development needs to be structured coherently before the lender is selected. The sponsor needs to understand total project costs, the cash equity available, planning and professional appointments, the construction programme, contingency, GDV and the proposed route to repayment. Only once those elements are clear can competing debt structures be compared properly.

This becomes particularly important where a new SPV is involved. Rather than allowing the lender to see only a recently incorporated corporate shell, the application should explain the ownership structure, identify the principals and their previous developments, evidence the source of equity and set out the relationship between the borrower, contractor and any associated companies. A well-presented case allows the credit committee to assess the actual sponsor and project rather than drawing conclusions from the incorporation date alone.

The Companies House Data Needs to Be Interpreted Carefully

There is an important methodological limitation to the headline figures. Companies House charge registrations provide evidence that security has been granted by a company in connection with borrowing, but Companies House no longer records the amount advanced under each individual charge. The 32,529 facilities and the 16.6% annual increase therefore measure the number of identified secured lending events, not the sterling value of loans advanced.

That distinction means a relatively small development facility and a much larger institutional loan can each contribute one registration to the activity count. It would therefore be incorrect to describe the findings as showing a 16.6% increase in the amount of development capital lent. The dataset is more useful as an indicator of transaction activity, lender participation, borrower structure, refinancing and redemption behaviour.

Even with that limitation, charge registrations provide valuable real-world evidence because they reflect security being formally created rather than simply lender marketing statements or indicative appetite. The direction of travel is therefore commercially significant: more secured lending events are being identified, specialist development lenders have increased their activity and newly incorporated companies continue to represent a meaningful part of the borrower population.

What the H1 2026 Figures Mean for Developers Now

The new evidence does not mean underwriting standards have disappeared. Development remains a specialist form of property finance, and lenders will continue to scrutinise sponsor experience, costs, construction risk, planning, valuation, sales assumptions and the credibility of the exit. A first-time developer will not necessarily receive the same leverage or pricing as a sponsor with a substantial track record, and some locations and property types will remain considerably easier to finance than others.

What the figures do challenge is the assumption that development lenders have broadly withdrawn or that a newly created project company is itself a reason not to seek funding. With secured lending events up 16.6%, pure development lenders increasing their activity, 24% of latest facilities associated with recently incorporated companies and hundreds of apparent refinancing events identified during the first half, there is a strong case for viable developers to test the current market rather than rely on outdated assumptions.

For a sponsor considering new finance or reviewing an existing facility, the objective should be broader than finding the lender with the lowest advertised rate. The real task is to identify the capital structure that gives the scheme an appropriate combination of leverage, equity efficiency, total cost, drawdown certainty and exit flexibility. In a market showing increasing activity, that analysis may produce a very different answer from the one available six or twelve months ago.