Inventory funding for builders is a type of real estate financing where a lender provides funds against a builder’s unsold residential or commercial units.
Inventory funding (also called unsold inventory financing) allows builders to raise capital by mortgaging completed or near-completed unsold properties. Instead of waiting for buyers, the developer gets immediate liquidity.
How It Works
- The builder offers unsold flats, shops, or offices as collateral
- The lender evaluates the market value and saleability
- A loan is sanctioned (usually a % of property value)
- The builder repays via sales proceeds or structured EMIs
Key Features
- Loan against ready or near-ready inventory
- Typically 50%–70% of property value funded
- Flexible repayment (linked to sales cash flow)
- Tenure: usually 1–5 years
- Can be structured as term loan or overdraft
Benefits for Builders
- Improves cash flow without selling at discounted prices
- Helps complete ongoing projects faster
- Supports new project launches
- Avoids liquidity crunch during slow sales cycles
- Better working capital management
Considerations
- Interest rates are usually higher than traditional home loans
- Lenders prefer projects with clear titles & approvals
- Sales velocity of inventory affects approval & terms
- Over-leveraging unsold stock can increase financial risk
