Top Construction Finance Trends for Lenders

The construction and sale of buildings and other physical infrastructure account for a disproportionate share of the country's gross domestic product. Finding the correct financial advantage is crucial for small and medium-sized real estate developers who want to make a name for themselves and take their businesses to the next level.

FREMONT, CA: All professionals in the real estate industry are relieved to see the building sector revive in 2022, following unprecedented years in 2020 and 2021. The Covid-19 pandemic has, however, altered how the construction sector functions, and when coupled with the now inescapable ESG agenda, development financing underwriting has acquired an additional degree of complexity. Below are five hot areas that we feel all lenders should keep in mind when reviewing development financing transactions in 2017:

The Cost of Cladding: The 'cladding issue' and the repair of cladding continued to gain interest from industry and the media. The government has announced intentions to determine who would be responsible for the costs of removing dangerous cladding, with the idea that the sector will shoulder these costs.

Many building owners and investors are considering alternative ways of financing and owning cladding in light of potential changes in building safety policies and minimum standards and the need to replace materials in the future. F&F and services similar to cladding are seen more as services than integral parts of a building.