Residential development has had a difficult few years. Rising build costs, higher financing costs and affordability pressures have all put schemes under strain.

For lenders with exposure to developments that are already struggling, there is a key question to consider – how long do you wait for conditions to improve?

Giving a borrower more time can feel like the least disruptive option, particularly when completing a development or allowing more time for sales could improve the outcome. However, waiting has a cost – interest continues to accrue, capital remains tied up and, if the underlying position deteriorates, recoveries may come under further pressure.

For lenders, acting early isn’t necessarily about enforcing early. It’s about understanding the position while you still have choices.

When residential developments aren’t selling, waiting may not solve the problem

One of the biggest challenges facing residential development is relatively simple: buyers aren't always buying at the pace, or price, developers need.

Recent market data underlines the challenge. The RICS UK Residential Survey May 2026 recorded a net balance of-34% for new buyer enquiries and -37% for agreed sales. The average time from listing to completion also increased to 21.5 weeks, the longest since the dataset began in 2017.

Developers have faced increases in the cost of building and financing homes. At the other end of the development, buyers are dealing with their own affordability pressures. This can leave developers caught in the middle. They need to achieve a certain level of sales to make a target profit, but those sales may take longer to materialise or buyers may not be prepared to pay the price required.

When a development starts to struggle, giving the borrower more time may be appropriate. But an extension shouldn't become the default simply because the alternative feels more difficult. Every additional month can have a financial consequence. Consider £20m of lending with holding costs of around £200,000 a month. Over another six months, that's £1.2m in additional costs – while the numbers will differ considerably between schemes, it illustrates how quickly the cost of waiting can become material

If buyers aren't buying today, the question is whether there is enough evidence to suggest another six months will materially change the position, without a change to the current dynamics. Often, a developer’s reluctance to adjust prices, at the expense of their target profit, only makes matters worse.

Part-built schemes create further complexity

If a developer is struggling to complete a project, because of cost over-runs or concerns about a reduction in end-values eroding expected profit (or even challenging viability), the lender’s situation can become more difficult.

Part-built schemes may not hold a value equivalent to the build costs already committed. Stopping construction midway through a project could therefore leave both the lender and developer facing significant losses.

Acting early doesn’t have to mean enforcement

Getting restructuring advisers involved doesn't automatically mean appointing administrators or LPA receivers and forcing an immediate sale. Early intervention gives lenders the opportunity to test whether the existing plan still stacks up. For completed developments this could mean assessing achievable sales values and disposal periods. For part-built developments this could involve reviewing what it will realistically cost to complete and determining further funding requirements. In both cases, lenders can challenge the assumptions underpinning the existing strategy and comparing the likely outcome with alternative routes.

In some part-built scenarios, putting more money into a scheme and completing the development could protect more value than trying to sell it unfinished. In others, further investment may simply increase the lender's eventual exposure. There isn't a standard answer. The objective isn't to rush into action – it's to establish which action gives the lender the best chance of protecting value.

Why delaying action can reduce lenders' options

There is rarely a simple answer when a residential development gets into difficulty. Market conditions may improve, sales may pick up and an extension may ultimately prove to be the right commercial decision. But hope on its own isn't a strategy. Lenders need to assess their position early, test whether the developer's plan remains credible and understand what other options are available. That matters because the decision doesn't necessarily become easier with time. Further delay can mean additional financing costs, more capital tied up and a different recovery position. Don't leave it until the only option left is the one you would have chosen last.

How we can help with residential development restructuring

When a residential development is under pressure, an independent review can help lenders compare the likely outcomes of different routes.

We work with lenders to assess the development, challenge the assumptions behind the existing plan and consider the potential outcomes of different routes. This could include continuing to fund a development through to completion, supporting an alternative exit strategy or taking more formal action where appropriate.

The aim is to make the decision early enough for it genuinely to remain a choice. If you’d like to discuss a residential development or understand what options may be available, get in touch with Lee van Lockwood or your usual RSM contact.

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