"It is accepted that the revival of the SME housebuilding market is crucial if we are to construct anything like 300,000 new homes a year in England."
LDS, part of Landmark Group, has launched an 'Instant Sales Guarantee' online engine, which reduces the risk of development finance for lenders by providing a guarantee to purchase new homes built by SME housebuilders.
The sales guarantee underwrites the financing of sites, and guarantees that LDS will acquire any unsold units on a development, to remove speculative risk and give lenders and housebuilders a guaranteed exit from sites.
Lenders, development finance brokers and housebuilders can generate a sales guarantee in two minutes after inputting details of the development into the LDS online engine.
Once contracts are exchanged, LDS pay developers a 10% up-front deposit. This deposit can be released to the developer to assist with cashflow, be it site purchase or simply working capital.
While LDS sales guarantees ensure the acquisition of all units on a site, they also allow the developer the ability to maximise their returns via open market sales, offering risk management of downside to lenders.
Access to finance is becoming a growing problem for SME housebuilders with The Federation of Master Builders reporting that 42% of SME developers were involved in sites that stalled for financial reasons in 2019.
Lack of available finance was also cited as a major challenge to SME housebuilders in FMB’s 2020 survey with 368 SME housebuilders going bust in 2019.
LDS aims to help double the number of homes built by SME housebuilders in Britain within the next five years, equating to over 25,000 additional houses each year, worth approximately £8 - £10 billion of new development.
Mark Hawthorn, CEO of Landmark Group, said: “It is accepted that the revival of the SME housebuilding market is crucial if we are to construct anything like 300,000 new homes a year in England. SME developers typically bring forward smaller brownfield and infill sites, these sites have potential for hundreds of thousands of new homes across the country, but developers are often stymied by access to finance. The LDS Sales Guarantee unlocks finances, funding and new development.
“We know that the process to review a new opportunity can sometimes be a bottleneck so set about solving this. The LDS online engine is a unique piece of Proptech which allows interested parties – be it lenders, developers, brokers or agents – to get themselves an instant Sales Guarantee and move forward with confidence. In many respects this is no different to many other online options where you can quickly and reliably sell your car, get an insurance policy, loan etc instantly and at a time and place to suit you.
“The LDS online engine is the start of a never-ending process of innovation and advancement we want to bring to the sector. The overarching aim is simply to improve every possible element of the process to ensure developers and lenders can bring forward more new housing and reduce what has been in my lifetime a perpetual shortage.”
Mark Goldberg, commercial CEO at Together, commented: “We have known the wider Landmark Group for many years so were one of the first development finance lenders to be involved with Sales Guarantees. It’s a brilliant product for lenders, developers and finance brokers to consider when structuring finance packages. For Together and our broker partners it offers additional comfort allowing more business to be written and much needed new housing to be created. Together has remained active throughout the recent volatility and will continue to support our developer clients, the LDS Sales Guarantee is the right product, right place and time for the market.”