Buying a site for two or more homes is a different loan from building a single house, and the way you structure it shapes your costs for the whole build. If you are in Blakeview or nearby in Adelaide's north and thinking about a duplex or small group of townhouses, this guide covers the decisions to make before you sign anything.
How Does Construction Finance Work for a Multi-Unit Site?
Construction finance pays for the land and then releases money to your builder in stages as work is completed. Because the home is not finished when the loan starts, lenders treat it differently from a standard home loan.
Under APRA's prudential standard APS 112, a property that is not fully completed is generally classed as land acquisition, development and construction (ADC) lending. There is an exception for a loan secured by a residential property under construction that will be the borrower's primary residence. APRA's guidance also says it would be reasonable for a lender to treat an incomplete duplex as an owner-occupied loan where the borrower will live in one dwelling and rent the other. These are capital rules for banks, so they do not set your rate or terms. They do explain why lenders ask different questions about a multi-unit project, and why your intentions for each dwelling matter.
Our construction loans page explains how we work with lenders across Australia on this kind of project.
Should You Live in One Unit or Build to Rent Them All?
Living in one dwelling and renting the other can suit lenders differently from building every unit as an investment. The right choice depends on your income, your deposit and your plans for the finished homes.
For investor-style projects, APRA's guidance says ADC loans are not limited to companies and include loans to individuals developing investment properties. Some of these exposures can carry a lower capital weighting where total debt is under 75 per cent of qualifying development costs, which can influence how a lender views your loan amount. The trade-off is that a lower debt level means you need more of your own funds in the project.
If any of the homes will be rentals, our investment loans team can talk through how that changes the structure.
How Does Progressive Drawdown Work During the Build?
With a progressive drawdown, the lender releases money in stages after each part of the build is finished, and interest is charged only on the amount drawn so far. Your repayments start small and grow as the build moves along.
Here is an illustrative example at 6.75% p.a. Consider a buyer who purchases a site for two townhouses, plans to live in one and rent the other, and signs a fixed price building contract with a registered builder. Assume the loan funds the land, so the land drawdown sits in the balance from settlement. Interest on the first progress payment of $120,000 alone for a month would be about $675 (120,000 x 6.75% / 12), but the real figure is higher because interest is also charged on the land drawdown. The buyer adds the land amount to each drawn balance, so the monthly interest is the total drawn (land plus progress payments) x 6.75% / 12.
The drawn balance keeps rising through frame, lock-up, fixing and completion, so the buyer budgets for interest on the fully drawn facility (the total loan x 6.75% / 12), not the early figures. The buyer also tests repayments at the higher assessment rate, and keeps a buffer, because rent from the second townhouse only starts once it is finished.
Whether you pay interest-only during the build, and how many drawdowns the lender allows, is set by each lender. Use our mortgage repayment calculator to test different drawn amounts before you commit.
What South Australian Building Contract Rules Affect Your Progress Payments?
In South Australia, a builder cannot ask for payment unless it is a genuine progress payment for work already carried out. Lenders set their own drawdown and inspection requirements, so check these with your lender as well.
Under the Building Work Contractors Act 1995 (SA), the deposit on work over $20,000 is 5 per cent. Contracts over $20,000 must be in writing, and you have five clear business days to cool off. Where the contract exceeds $20,000 and development approval is required, building indemnity insurance must be in place before work starts. From 10 November 2025, that cover is up to $250,000 if the builder dies, disappears or becomes insolvent.
A multi-unit contract can be large, so ask your builder for the insurance certificate early and confirm the payment stages before applying for finance. A builder cannot ask for payment ahead of the work done, other than the capped deposit, so pay only for completed stages.
What Will a Lender Want to See in Your Construction Loan Application?
A lender wants to see that you can afford the repayments at a higher rate than the one you are offered, and that the project is properly approved and costed. That means your income, debts and the build plan are all assessed together.
APRA requires banks to assess new borrowers at a rate at least 3 percentage points above the loan rate, and this buffer was confirmed as unchanged in May. A prudent lender also discounts less stable income such as bonuses or overtime by at least 20 per cent. If you are relying on future rent from one unit, expect the lender to apply its own policy on how much of it counts.
For the project itself, lenders typically ask for project documents such as plans, the building contract and approvals, but requirements vary by lender. The loan-to-valuation ratio during construction includes the full committed amount, including undrawn funds, so the lender looks at the whole facility rather than just what has been released. Check where you stand first with our borrowing capacity calculator.
How Does Tax Treat Interest on a Multi-Unit Build?
For a property you intend to rent, interest on a construction loan can be treated differently from interest on a land loan while the land stays vacant. Please speak with your accountant about your own situation, because the outcome depends on your circumstances.
The ATO says holding costs on vacant land, including interest on money borrowed to buy it, are not deductible for expenses incurred on or after 1 July 2019. Interest on borrowings connected with construction is not treated as a holding cost. The ATO's example involves a separate land loan and construction loan. Where one loan funds both, the interest has to be apportioned. This is one reason to discuss loan splits with both your broker and your accountant before you settle on the land.
Capital works deductions on a residential building generally start only once construction is complete. Again, your accountant can confirm what applies to you.
Frequently Asked Questions
Can I get a construction loan to build more than one home on a block?
Yes, lenders can fund multi-unit builds such as duplexes or townhouses. Your plans, approvals, income and how you intend to use each dwelling all affect the lender's decision.
Do I pay interest on the full construction loan from day one?
Generally, interest is charged only on the amount drawn so far, so repayments grow as each stage is paid. Lenders set their own rules on repayment type during the build.
What is the maximum deposit a builder can ask for in South Australia?
For work over $20,000, the deposit is 5 per cent under the Building Work Contractors Act 1995 (SA). Builders can only request genuine progress payments for work already completed.
Is interest on a construction loan tax deductible?
It can depend on whether the property is for rent and how the loans are structured. Please speak with your accountant about your situation.
