Property buyers are more aware than ever of the importance of sustainability and reducing our environmental impact. Consequently, many are adding green technology, materials and building practices to their list of must-haves in a new property.
For property developers, this represents an excellent opportunity. One of the main barriers to incorporating green technology in our homes is that it can be expensive to retrofit. However, when designed as part of the build, they can make a big difference to the cost and desirability of a property.
But how do you secure funding for eco-friendly property developments? Is it any different from a ‘normal’ project? Is there more risk involved? This post explores everything you need to know about financing sustainable property development.
What is sustainable property development?
There is no true definition for sustainable or eco-friendly property development but it’s broadly a practice that focuses on building in a way that minimises the impact on the environment and reduces its carbon footprint.
It also aims to maximise efficiency throughout the lifecycle of the property, from planning to construction, usage and potentially demolition or repurposing in the future. Finally, it also intends to create a healthy environment for residents and wildlife.
What makes a property eco-friendly?
Again, there are no accepted criteria for determining a property to be eco-friendly but sustainable buildings are usually designed to minimise energy consumption through features like high-performance insulation, triple-glazed windows, energy-efficient appliances, and renewable energy sources such as solar panels or heat pumps. Generally, a property that has a high EPC rating could be considered efficient and eco-friendly.
The materials used in the construction of eco-friendly buildings often also come from sustainable, renewable or reclaimed/recyclable sources. This could include sustainable timber, reclaimed stone or even organic insulation made from materials like straw or wool.
Going further, some developers and builders may also choose to use low- or zero-emission vehicles to deliver materials, or during the construction itself. Finally, eco-conscious developers will factor biodiversity offsetting into their planning and budgets.
How to finance sustainable property developments
In many ways, securing property development finance for an eco-friendly build is no different from any other project. A lender will look at the viability of the project and the business plan to decide whether they believe the finished development will achieve the desired asking price.
As sustainable materials, building techniques and green technology may cost more or require additional expertise to work with, these costs need to be reflected in the sale price. Similarly, specialist architects may demand higher fees and planning permission may be harder to achieve depending on the nature of the build.
In any case, a solid exit strategy is vital. Lenders will need to see that you have researched the market you intend to sell to and are creating a property they will want, for the price you request. Ask yourself:
- How much money will your target buyer be willing to spend?
- Is the location suitable for this type of build?
- Will the materials you need be available when you need them or are they likely to cause delays?
- What regulations will you have to meet?
- Will you need specialist architects, designers or tradespeople to complete the project?
- How will all of the above affect your budget and proposed timeline?
Sustainable Building Incentives
While there are currently no national-level green construction incentives, your Local Authority may provide tax relief or grants for green projects so it’s important to discuss these with the planning office.
Some renewable technologies such as solar panels, batteries, inverters, and heat pumps are also available with 0% VAT until March 2027, which could make incorporating them much more cost-effective for your project. Likewise, homeowners can claim up to £350 for the purchase and installation of a home EV charger.
Sustainable Property Development Finance in the South East
At Hunter Finance, we’re always keen to work with talented and creative property developers who want to turn an idea into reality. We provide property development finance across the South East and can approve your application within a matter of days. Contact us today to find out more.
