Today developers around the country are looking for larger sites with resource consents to take advantage of the Government’s new plan to underwrite construction of new houses, townhouses and apartments. The new time-limited Residential Development Underwrite (RDU) scheme aims to de-risk developments, with the underwrite acting as the pre-sales needed for developers to secure finance for consented, costed and ready-to-commence projects.

The programme will be managed by the Ministry of Housing and Urban Development and applications for interested developers will open this coming Monday, October 7. It is understood that any initial applicants successful in getting an underwrite will likely receive confirmation within two to three months.

The underwrite is largely targeted to main centres (Auckland, Hamilton, Tauranga, Wellington and Christchurch), however developments in other locations that meet the full criteria may also be considered.

“The new Residential Development Underwrite (RDU) will help support residential construction activity in the near term by enabling credible developers to access finance that they otherwise wouldn’t have gotten. This also has the benefit of ensuring there are houses ready to go for buyers who enter the market as interest rates drop,” Housing Minister Chris Bishop said.

“For a development to be approved for the underwrite, it must have a minimum of 30 houses. The developer must have a proven track record of successfully building and selling houses of a similar size and scale, have ownership or use of the land (or an option to do so), and have all the required resource consents for residential housing.”

There will be no price caps or eligible buyer restrictions, and the programme will cover all types of dwellings: standalone houses, townhouses and apartments.

“In addition to providing a recent market valuation from a registered valuer, the developer must also be able to provide satisfactory evidence that underwrites are needed for the development to proceed within 6-12 months – for example, evidence that reasonable attempts have been made to market the development, that finance approval is conditional on pre-sales, and that the required workforce is available.”

Funding for the RDU will be redirected from unused funding from the Kiwibuild and BuildReady Development Pathway programmes. Both of these programmes are now closed to new applications.

“The number of houses supported by the Residential Development Underwrite programme will depend on wider economic conditions, demand from developers, and the speed at which houses are built and sold – the faster projects are completed, the more capacity will be recycled back in capacity for further underwrites,” Building and Construction Minister Chris Penk said.

More information is available on the Ministry of Housing and Urban development website.