Most residential subdivisions in Victoria are funded in two parts. Early costs (feasibility, design and the planning permit) are usually paid from your own savings or equity in another property. The larger cost, civil works, is where subdivision finance or construction finance is normally used, drawn in stages as the work is completed. The loan is then repaid by selling lots, refinancing, or both once new titles are issued.
This guide walks through each stage of a Victorian subdivision, what it costs to budget for, and how each stage is typically paid for.
The short answer: how subdivisions are usually funded
- Before the permit: your own funds or equity. Few lenders will fund a project that has no planning permit.
- Land: if you already own the block, its existing mortgage stays in place or is refinanced into the subdivision loan. If you are buying, the purchase may be funded with a land or development loan.
- Civil works: a subdivision or construction facility, released in progress payments.
- After titles: the loan is repaid from lot sales, or the lots you keep are refinanced to a standard home or investment loan.
Subdivision stages and funding at a glance
|
Stage |
What happens |
Costs to budget for |
How it is usually funded |
|
1. Feasibility and planning permit |
Site assessment, design, permit application to council |
Town planner, land surveyor, design and reports, council permit fees |
Own funds or equity in another property |
|
2. Certification and referrals |
Plan of subdivision prepared, certified by council, referred to servicing authorities |
Surveyor, engineering design, authority fees |
Own funds; sometimes included in a development facility once the permit is issued |
|
3. Civil works |
Roads, drainage, sewer, water, power and telecommunications connections built to authority standards |
Civil contractor, authority connection charges, supervision, contingency |
Subdivision or construction finance, drawn in stages |
|
4. Statement of compliance and titles |
Council confirms requirements are met; plan registered and new titles issued |
Surveyor sign-off, open space contribution, any development contributions, registration fees |
Usually within the facility, or own funds |
|
5. Exit |
Lots sold, or kept and refinanced |
Agent and legal fees, tax |
Sale proceeds or a new home or investment loan |
Stage 1: Feasibility and planning permit
A planning permit is required to subdivide land in Victoria, so this is where every project starts (Victorian Government: Subdivision). Residential subdivisions must meet Clause 56 of the Victoria Planning Provisions, which sets standards for lot layout, access, open space and services.
Applications and referrals are managed online through SPEAR (Surveying and Planning through Electronic Applications and Referrals), which most surveyors and planners already use.
How it is funded: most lenders want an approved permit before they will lend on a subdivision, because the permit is what gives the project its value. Plan to pay these early costs yourself, or release equity from another property with a second mortgage or a top-up on an existing loan.
This is also the time to test the numbers. A lender will want to see a feasibility showing costs, expected lot values and a buffer for overruns. Our guide on what lenders look for in a feasibility study covers this in detail.
Stage 2: Certification and referral authorities
Once the permit is issued, a licensed surveyor prepares the plan of subdivision. Council certifies the plan under the Subdivision Act 1988, after referring it to the authorities that will service the new lots. These are typically the water, drainage, electricity, gas and telecommunications providers (Subdivision Act user guide).
Each authority can consent, ask for changes, or set conditions, such as new sewer connections or an electricity substation. Their conditions drive much of the civil works cost, so get them early and send them to your lender.
A certified plan has a limited life: if it is not registered within five years of certification, the plan lapses (Subdivision Act user guide). Your finance needs to fit within that window.
Stage 3: Civil works, where most finance is used
Civil works are the physical infrastructure the new lots need: driveways or roads, stormwater drainage, sewer and water connections, power and telecommunications pits. For a small two- or three-lot subdivision this may be mainly service connections. For a larger estate it includes roads and landscaping.
How it is funded: this is where a subdivision facility or a construction loan usually comes in. Funds are generally released in progress payments rather than as a lump sum. Before each payment, the lender typically asks for confirmation that the work has been done, often from a quantity surveyor or engineer. On many development facilities, interest can be added to the loan during construction instead of being paid monthly; check how your lender handles this.
Budget a contingency. Authority conditions, ground conditions and contractor pricing can all change the final cost.
Stage 4: Statement of compliance and new titles
When the works are finished, council issues a statement of compliance. It is issued once council is satisfied that the requirements for public works have been met, or that there is an agreement in place to secure them (Subdivision Act user guide). Where no works are needed, a licensed surveyor must first confirm that the lots and boundaries have been marked out.
The certified plan and statement of compliance are then lodged with the Registrar of Titles at Land Use Victoria, and the new titles are issued. Only at this point can individual lots be settled with buyers.
Larger projects can be done in stages, but the planning permit must specifically allow a staged subdivision (Subdivision Act user guide). Staging can reduce how much you need to borrow at once, because early lot sales help fund later stages.
Victorian costs to budget for
These costs are easy to underestimate, and lenders will expect to see them in your feasibility.
- Public open space contribution. Where the planning scheme doesn’t specify an amount, council can require up to 5% of the land, 5% of its value, or a mix of the two, under section 18 of the Subdivision Act 1988. The rate can be higher where a council has set one in its planning scheme. A two-lot subdivision that is unlikely to be subdivided further may be exempt (Subdivision Act user guide).
- Development contributions. Some areas have development or infrastructure contributions plans that apply per lot. Check the planning scheme for your site.
- Growth Areas Infrastructure Contribution (GAIC). In Victoria’s designated growth areas, GAIC can be triggered by a subdivision, a building permit application or a land purchase. Deferral and staged payment options are available (State Revenue Office: GAIC).
- Windfall gains tax. If your land has been rezoned, check whether windfall gains tax applies (State Revenue Office: windfall gains tax). Holding land ahead of a rezoning is a different strategy from subdividing; see our land banking page.
- Authority and connection fees. Water, sewer and power authorities charge for new connections and assets.
- Holding costs. Interest, council rates and land tax while the project runs.
- Tax on sale. Subdividing and selling can have income tax and GST consequences. Get advice from a registered tax agent before you commit.
Can you subdivide land that has a mortgage?
Yes, in most cases, but your existing lender needs to be involved from the start. The lender holds security over the whole block, so most mortgages require its approval before the land is subdivided. When lots are sold, the lender will usually require part of the loan to be repaid before it releases each new lot’s title. Your conveyancer can confirm exactly what your lender and Land Use Victoria need.
Talk to your lender early. Some will approve the subdivision and keep the loan in place; others may prefer that you refinance into a subdivision facility. If your lender won’t help, a broker can compare other options.
What lenders look at before funding a subdivision
- An approved planning permit and the authorities’ conditions
- A feasibility with total costs, expected lot values and a contingency
- Your contribution: how much of the total cost you are putting in yourself
- Loan size compared with project value: lenders assess both the total cost and the expected end value
- Builder or civil contractor and a fixed-price or detailed quote
- Exit strategy: how the loan will be repaid (sales, refinance or both), and for some lenders, presales
- Your experience and finances, including other debts and income
Requirements vary widely between lenders, so there is no single set of rules.
Bank, non-bank or private lender?
|
Lender type |
Typically suits |
Trade-offs |
|
Major banks |
Small subdivisions with a strong borrower and a clear exit |
Stricter policy; slower approvals |
|
Non-bank lenders |
Projects outside bank policy, or borrowers with complex income |
Often higher cost; flexible structures |
|
Private lenders |
Short-term or time-critical funding, second-ranking loans |
Usually the highest cost; short terms; exit must be clear |
A broker who arranges land subdivision loans can compare these for your project. For larger multi-lot or multi-dwelling projects, see how property development loans work in Australia.
How the loan ends: sell, refinance or keep
Subdivision finance is short-term, so the exit matters as much as the approval.
- Sell all lots: sale proceeds repay the loan, lot by lot.
- Sell some, keep some: sell enough to reduce the debt, then refinance the lots you keep to standard loans.
- Keep and build: move into a construction loan to build homes on the lots.
Example (illustrative only): an owner in Melbourne’s outer suburbs subdivides a large block into three lots. They pay for the planner, surveyor and permit from savings. Their existing lender approves the subdivision, and a subdivision facility funds the service connections in progress payments. After titles are issued, two lots are sold to repay the facility, and the owner keeps the third lot with its existing home under a standard home loan.
FAQ
Yes. A planning permit is required to subdivide land in Victoria. Residential subdivisions must also meet Clause 56 of the Victoria Planning Provisions.
Usually not. Most lenders fund a subdivision once the permit is approved. Early costs are normally paid from your own funds or equity in another property.
It is council's confirmation that the subdivision's requirements, including public works, have been met or secured. It is needed before the plan can be registered and new titles issued.
A certified plan of subdivision lapses if it is not registered within five years of certification.
This article is general information only and does not consider your personal objectives, financial situation or needs. It isn’t legal, tax or financial advice. Lender criteria change and vary between lenders. Speak to a licensed professional before acting.
Planning a subdivision in Victoria? Talk to our team about structuring your subdivision finance.
