How planning gain arises
Land without planning is valued on its existing use, or on the hope of future consent. Once permission is granted, its value reflects what can be built. The difference can be substantial, and capturing it is one of the main ways developers create value before construction starts.
Buying before planning is usually funded with a planning gain bridge or land finance, at lower leverage, while the application is made.
Land value as your contribution
When you move onto development finance, the lender looks at the land's current value with planning rather than only what you paid. An illustrative example: land bought for £300,000, now valued at £550,000 with consent. If the lender recognises the £550,000, you have £250,000 of uplift counted towards your contribution, plus any cash already paid. That can cover much or all of the equity a scheme needs.
Lenders differ widely in how far they recognise uplift. Some use the purchase price for a period after buying, some use current value, and some sit in between.
What lenders check
- A valuation of the site with planning, by the lender's panel valuer
- How long you have owned the site and what you paid
- The cost and effort involved in obtaining consent
- Whether the scheme still shows a healthy profit at the higher land value
- Any overage or clawback owed to the seller
Recognised uplift still has to fit within loan to cost and GDV limits.
Risks to plan for
Planning may be refused, delayed or granted for a smaller scheme. Section 106 obligations and CIL can reduce the value. Bridge terms should allow for appeals or resubmissions. A sale with planning, rather than building, is a valid alternative exit, and lenders will often accept it.
Getting started
Speak to a planning consultant about the realistic prospects of consent, evidence the value with planning, and model the development appraisal at that value; see writing a development appraisal. Then compare land and development lenders on Instant Quotes.
Overage and selling with planning
Some land is sold with an overage or clawback clause, which entitles the seller to a share of any uplift if planning is granted. Overage reduces the value available to you and to the lender, and lenders will want to see the agreement. Check any overage before buying and build it into your appraisal.
Not every developer goes on to build. Selling a site with planning can be a valid exit from a planning gain bridge, realising the uplift without taking on construction risk. Lenders will accept this exit where there is evidence of demand from developers and realistic pricing. Many land bridges are structured with both options open: build with development finance, or sell with planning, depending on market conditions when consent is granted.
Common questions
What is planning gain?
The increase in a site's value when planning permission is granted, compared with its value before consent.
Can planning uplift be used as my deposit?
Some development lenders recognise the land's current value with planning, so the uplift counts towards your contribution. Approaches vary between lenders.
How do I fund land before planning?
Usually with a land or planning gain bridge at lower loan to value, refinanced onto development finance once consent is granted.
This guide is for general information only and should not be treated as legal, tax or financial advice. Lender requirements depend on the property and your circumstances.
