Buying the land is the first big outlay of any development and often the hardest to finance. Banks lend cautiously against land without a licence, and many projects stall at this stage. Here is what a lender looks at and how to structure land and construction together.
Why land is the hardest part to finance
Land value depends on what can be built on it. A plot without a licence, without firm planning or with unconfirmed uses carries planning risk, and lenders discount it. The further advanced the process — urban fully serviced land, approved project, granted licence — the better the valuation and the terms.
What to check before asking for finance
- Permitted use and buildability: a municipal certificate or planning report confirming the project can be built. Land without the permitted use for the intended project is something no lender or investor will accept.
- Licence status: applied for, granted or still to be applied for, with realistic timelines.
- Restrictions and easements: roads, coastal law, airport zones, environmental or heritage protection, which can limit height, use or floor area.
- Ownership and charges: an up-to-date land registry extract (nota simple) showing any mortgages or attachments.
- Independent valuation: prepared by an approved valuation company (Orden ECO/805/2003) with a recent date; an old valuation, or one with an unclear reference date, loses weight as support.
Land finance options
| Route | When it fits | Watch out for |
|---|---|---|
| Bank mortgage loan | Urban land with licence or advanced application, and an established developer | Requires equity and guarantees; lower advance rate than for construction |
| Alternative debt (funds, platforms) | Land with moderate planning risk, short terms and a need for speed | Higher cost; usually requires a clear repayment plan |
| Investor contributions in the next phase | Deals with a 12-month land purchase term and repayment from the construction round | Repayment depends on the next phase closing |
Land and construction in one transaction
When land and construction are financed separately, the developer negotiates twice and risks being left without the second part. Structuring land and construction together from the start gives lenders visibility of the whole project. That is what we do at iberfund: we analyse what each source can cover and in what order, and the initial analysis is free of charge.
Construction costs count too
A lender compares your budget with market benchmarks. In new residential construction, costs depend on type, specification and location, and a detached house typically costs considerably more per square metre than a multi-family building; with a pool, landscaping or a basement it rises further. An itemised budget with measurements, consistent with the design, is far more credible than a single headline figure.
Frequently asked questions
Do banks finance land purchases in Spain?
Yes, when the land is urban or fully serviced, the permitted use is confirmed and the developer provides sufficient equity and guarantees. Against land without a licence or with planning risk, finance is much more limited.
What documents do lenders ask for to finance a plot?
Typically a land registry extract, a planning report or certificate, licence status, project or outline design, an approved valuation, a construction budget and financial information on the developer.
Can land be financed with alternative capital?
Yes. Funds, platforms and private investors finance land on short terms at a higher cost than banks. It is common when the purchase must close quickly and repayment comes from the construction-phase finance.
The figures in this guide are indicative market ranges: they change with timing, lender and developer profile. Every transaction is assessed individually and this page is not an offer of finance.
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