One in five UK property developers are facing mounting pressure from their lenders as cost inflation, project delays and weaker market conditions strain development pipelines, according to research from Octane Capital.
The survey of developers commissioned by the specialist lender found that 20% had come under increased scrutiny or demands from their funders.
Late-stage projects were most at risk, with 18% of developers reporting that lenders had “turned the screw” during the sales or completion phase, compared with 10% at the early stage and 7% during construction.
Cost overruns, delays and softer values were the most common triggers, cited by between 17% and 20% of respondents.
FUNDING THREAT
Lenders’ responses included imposing higher fees or interest rates (24%), withholding drawdowns (22%), transferring loans to third parties (20%), or pushing developers to sell units more quickly, often at reduced prices (17%). In some cases, 17% said their funding had been threatened altogether.
Despite these pressures, only 16% of developers described their lender as “very supportive”, while more than half (57%) said their lender had not been supportive.
The lack of flexibility has prompted nearly a quarter (23%) of developers to seek support from specialist lenders over the past year.
MARKET UNCERTAINTY
Jonathan Samuels, chief executive of Octane Capital, says: “Cost inflation, market uncertainty and delays are part of the reality of development, but traditional lenders are often quick to apply pressure rather than work collaboratively.
“This can leave projects at risk of stalling or being sold off prematurely.
“Specialist finance can provide a vital lifeline in these circumstances, offering the speed, flexibility and partnership approach that developers need to overcome challenges and deliver homes.”
The findings come amid heightened scrutiny of the property development sector, with rising borrowing costs and subdued housing demand stretching viability across multiple schemes.
