Strategic land finance for sites held before planning consent

Strategic land is land with genuine longer-term development potential that does not yet have planning permission. Typical examples are greenfield sites on the edge of a growing town, land put forward for a local plan allocation, urban extensions next to existing settlements, and parcels that sit within a authority's likely direction of growth.

What makes it strategic is timing. The owner is not trying to build now. They are holding a position while the plan-making system slowly catches up, in the hope that the site is first allocated for housing or employment and then, later, granted consent. Each step adds value because it moves the land closer to a deliverable scheme.

This is the ground on which planning gain finance works. The security is the land at its current value, and the repayment story is built on the planning uplift that allocation and consent are expected to create. Because none of that is guaranteed and the timetable is long, strategic land needs a different kind of funding from a site that already has a permission and a build programme ready to go.

A ready-to-build scheme repays quickly: you draw down, you build, you sell or refinance. Strategic land does the opposite. You may hold it through several rounds of consultation, examination and appeal before the planning position improves, and that can run for years rather than months.

Standard development finance is priced and structured for a build programme, so it does not sit comfortably against land that is simply being held. What strategic land needs is funding that tolerates a long, uncertain timetable and does not demand construction milestones that will not arrive on schedule.

• Terms that stretch out, commonly in the 1 to 36 month range, often with the expectation of renewal or refinance as the planning position matures.
• Interest usually rolled up rather than serviced monthly, because the land produces little or no income while it is held.
• Conservative leverage set against current value, reflecting that consent is a hope, not a certainty.

Land bridging against this kind of position tends to sit around 0.75% to 1.1% per month. It is not cheap money, so it works best where the expected uplift comfortably outweighs the carry.

The core security is almost always a first legal charge over the land at its current value, before any consent is assumed. Funders lend against what the site is worth today, not what it might be worth after allocation, which keeps the loan grounded in something real if the planning route stalls.

On strategic land held before consent, expect leverage up to around 50% to 65% of current value. Once a meaningful planning position is in place, that can move up to around 65% to 75% after consent, because the security is now worth more and the exit is clearer. Facilities across this market run from around £100k to £25m, with the structure tailored to the size and stage of the holding.

Because there is little or no income, interest is usually rolled up and settled on exit. A funder will want to understand the planning strategy, the timetable, and the realistic routes to repayment before committing. The stronger and more evidenced that story, the more flexible the structure and pricing tend to be. We shape the request so a funder can see the land, the plan and the exit as one coherent case.

Strategic land players hold positions in two broad ways, and each changes what can be funded.

Under an ownership route, the developer or investor buys the land outright and holds it through the planning process. Here the security is straightforward: a charge over land you own. This is the more fundable position, because there is a clear asset to lend against.

Under an option or promotion route, you do not own the land. Instead you hold a contractual right, an option to buy at a set price or discount, or a promotion agreement to secure consent and share the proceeds. These rights have value, but they are harder to lend against because the security is a contract rather than the freehold itself.

• Options give control without the full capital cost of purchase, useful for tying up a site cheaply while the plan develops.
• Promotion agreements align the promoter and landowner around getting consent and selling, with proceeds shared.

Funding an option or promotion position is possible but more specialist, so we look at the contract terms carefully and match them to funders comfortable with that kind of security. Related reading sits under promotion agreement finance.

Strategic land follows a recognisable value ladder, and the exit is built on climbing it. First the site is allocated in a local plan, which signals that the authority expects development there. Then a planning consent is granted, whether outline or full, which turns potential into a deliverable scheme. Then the land is sold, very often to a housebuilder who wants a consented, or near-consented, site to build out.

Each rung adds value, and each rung also creates a natural point to repay or refinance. Some holders sell straight after allocation, taking a smaller uplift for an earlier, more certain exit. Others hold through to consent to capture more of the planning gain before selling on.

For a funder, the key question is which rung repays them and how firmly that is evidenced. A clear planning strategy, a credible timetable and genuine demand from housebuilders make the exit believable. As an illustration only, a site bought at existing-use value might be worth considerably more once allocated and more again once consented, though this is not a promise of any particular value or outcome. The exit is what the whole facility is designed around.

Be clear-eyed about the risks. Planning is not guaranteed: sites get refused, allocations get dropped, and local plans slip. Timescales are long and hard to predict, so rolled-up interest keeps accruing while you wait. And the exit depends on housebuilder demand, which moves with the wider market. None of that makes strategic land a bad position, but it does mean the numbers need headroom.

The way to protect yourself is honest arithmetic: a conservative view of current value, a realistic timetable, a sensible cost of carry, and an uplift that still works even if things take longer than hoped. That is exactly the case a good funder wants to see.

To enquire, tell us where the land is, what you hold, whether you own it or hold an option or promotion agreement, the current value, and where you are in the planning process. We will tell you honestly whether it is fundable and outline realistic terms. Planning gain and land finance for companies, developers, promoters and investors is unregulated commercial lending outside the FCA's regulated-mortgage perimeter; where a deal would be a regulated mortgage contract it is referred to an appropriately authorised firm. Nothing here is financial, legal, planning or tax advice.