The Spanish development loan: what you need to know

Fiduciam is a well-established operator in the Spanish development loan market; at present it finances ongoing development projects in Spain for a combined gross development value of €444,350,000.

Fiduciam’s Spanish development loan solutions cater for both domestic and international developers, and typically finance affordable and high-end residential, holiday homes and commercial developments.

In this paper we highlight some of the development finance challenges and opportunities that are specific to Spain.


A non-Spanish developer wished to proceed with the construction of a complex consisting of fifteen holiday homes in Mallorca. They had identified a plot of land in a prime location, agreed the purchase price and obtained the necessary permits and approvals from the local authorities. However, they lacked the capital required to commence construction.


The developer approached several Spanish banks. The local banks were keen on providing financing provided that the developer pre-sold 70% of the units, and would only cover 50% of the construction costs.

Pre-selling such a large percentage of the holiday homes did not make sense for the developer, for four reasons: 

  • Off-plan sale prices tend to be lower than the sale prices achieved during later stages of the development or following practical completion;
  • Having obtained all the necessary building permits, the developer was eager to commence construction without the added delay of a marketing period;
  • As the developer had agreed with the seller of the plot to acquire it as soon as planning came through, the finance costs of acquiring the plot and then holding on to it during the marketing period for the holiday homes would have added to the finance costs; and 
  • At that moment in time the developer wished to focus on negotiating and closing the construction contracts; given the prevailing inflationary pressures, the developer’s priority was to secure construction packages, rather than marketing and pre-selling the holiday homes.

An alternative solution acceptable to the Spanish bank was for the developer to finance 50% of the construction costs through equity.  As the developer had assembled a syndicate of investors to provide the equity, the return on equity was an important consideration for them though.  Financing half of the construction costs through equity would have meant that the return on equity became too low to remain appealing to the developer’s investment partners.

The developer then started looking for alternative financing solutions and came across Fiduciam, a by then well-established private lender in the Spanish development loan market.


The developer contacted Fiduciam’s Spanish lending team and discussed their project and need for a Spanish development loan in detail. Fiduciam was impressed with the location, the design of the project, and the strong demand for holiday homes in that part of Mallorca. After conducting its due diligence, Fiduciam offered a Spanish development loan for a total amount of about €10 million.

Fiduciam’s Spanish development loan was structured in two phases, to suit the developer’s specific needs. The first phase provided the developer with about €2 million to complete the purchase of the plot of land and start site preparation works. The second phase provided an additional €8 million to finance the construction of the holiday homes and cover the loan’s interest during the construction phase.

Fiduciam’s Spanish development loan carried an interest rate of 0.90% per calendar month, which is higher than what the Spanish banks typically charge, but did not come with any non-utilisation or commitment fees, which Spanish banks typically do charge.  It must be noted that finance costs on development loans in Spain are generally higher than in Northern Europe.  Yet, despite the finance costs associated with Fiduciam’s Spanish development loan being higher, the developer and his investment partners considered Fiduciam’s solution to be more attractive to those offered by the Spanish banks.  The reasons are simple: increased flexibility, quicker turnaround times and a higher return on equity.  The higher return on equity is made possible thanks to Fiduciam being satisfied with a much smaller equity investment into the project and not requiring off-plan sales, which typically necessitate the sale price to be discounted.  And from here, it could only get better, thanks to a peculiarity of the Spanish development loan market, the insured deposit.  In fact, the developer never paid 0.90% per calendar month on the overall amount of senior secured development finance outstanding, in reality they paid just over 0.70% per calendar month.  How they achieved this, we explain below.


The developer accepted Fiduciam’s Spanish development loan offer and started construction straight away.  Whilst the site preparation works were progressing, the developer negotiated a fixed price construction contract, and then started preparing the marketing campaign. As potential buyers visited the construction site, and the development started to take shape, some buyers became eager to reserve a unit, and then to enter into a sale agreement.  The developer had prioritized the works on a unit to have a show home, to provide a better feel for the final product.  Thanks to this approach the developer could sell at full price, without having to grant a discount often associated with off-plan sales.

The developer was able to pre-sell six out of the fifteen holiday homes whilst works were ongoing. For each sale, the developer received deposits equal to 30% of the sale price.  Under Spanish law, deposits cannot be used towards the construction costs, unless they are insured (seguro de afianzamiento).  Through its years of lending in Spain Fiduciam has strong relationships with multiple specialist insurance companies that are willing to insure the deposits on development projects financed by Fiduciam. Therefore, Fiduciam assisted the developer in procuring deposit insurance, and opening the special account which is needed for the deposits.  As a result, the developer was able to use the deposits to finance the construction works; in the end they financed nearly a quarter of the construction budget. 

The holiday homes were completed within the expected timeframe and sold out within four months of achieving practical completion. The developer was able to repay the loan in full and make a healthy profit on the project; development profit margins often being higher in Spain than in other European countries.


The Fiduciam’s unique expertise in the Spanish development loan market allowed the developer to achieve their goals and complete the project successfully. When traditional Spanish banks require high pre-sale levels or a substantial equity injection to grant their development loans, Fiduciam does not. Fiduciam provides comprehensive financing solutions in Spain for developers that favour flexibility, quicker turnaround times and a maximization of their return on equity.