Financing for new real estate development projects: what you need to know

Financing is one of the most decisive stages in the success of any real estate project. Whether for new construction, rehabilitation, or the expansion of an existing asset, credit approval depends on increasingly strict requirements and solid preparation. With the new rules introduced by Basel IV, the role of banks has changed, and developers have been looking for more flexible financing alternatives.

This article helps clarify how financing for development projects works in Portugal, what criteria banks apply, and why specialised legal advice makes a difference from day one.

1. What banks require today to finance new projects

Financial institutions are asking for more and more information before approving financing. Among the key elements are:

• A detailed business plan, with cost estimates, timelines, sales and profitability.
• Real guarantees, such as a mortgage over the land or the property to be built.
• Planning and zoning documentation, including proof of ownership, feasibility and licensing stage.
• Assessment of commercial viability, including demand analysis, typologies, location and risk.

This in-depth analysis has become the rule, not the exception, due to tighter European prudential requirements.

2. Public credit lines and European alternatives

Large projects can access specialized financing, including:
• Lines from the European Investment Bank (EIB), with favorable conditions for affordable housing, energy-efficient buildings, and urban rehabilitation.

• Up to 2030, a €1.34 billion credit line is available, aimed mainly at municipalities and projects with positive social and environmental impact.

Beyond bank credit, many developers are turning to private debt, investment funds, and institutional investors, which offer greater flexibility in terms and structuring.

3. ESG criteria: no longer optional, now mandatory

Projects that incorporate environmental, social, and governance criteria now have a higher likelihood of being approved. Banks look for:
• energy efficiency
• emissions reduction
• responsible use of resources
• positive impact on the community

These criteria directly influence interest rates, the guarantees required, and the final financing decision.

4. Financing terms and conditions

Terms vary according to the type of transaction:
• Purchase of land or property: maturities up to 40 years.
• Development and construction: maturities adjusted to the construction cycle and sales plan, with phased amortization.

Financing is released progressively against proof of progress, budget, and construction milestones.

5. Why involving a lawyer in the process is essential

Real estate financing involves multiple contracts, guarantees, and legal obligations. The lawyer’s role is to avoid risks, protect the investor, and ensure full compliance with the law.

a) Legal certainty and due diligence
A lawyer will verify:
• title to the land
• existence of encumbrances, mortgages, or disputes
• planning/zoning framework and licences
• environmental risks or heritage/protection constraints

This prevents surprises during the financing process or the construction phase.

b) Financing negotiation
The lawyer helps negotiate:
• interest rates and maturities
• default and acceleration clauses
• guarantees required
• allocation of responsibilities between the parties

Clear and balanced contractual drafting is what protects the developer throughout the entire project.

c) Legal representation and dispute resolution
If disputes arise with the financial institution, delays, additional requests, or contractual disagreements, the lawyer steps in to safeguard the investor’s position.

d) Tax and regulatory obligations
This includes:
• registration of guarantees
• required insurance
• tax obligations linked to the financing
• documentary and regulatory compliance

A failure at this level can delay the release of funds or even jeopardise the project.

And what changes for foreign investors?

Portugal remains an attractive destination for those who wish to live or invest in the country, and mortgage financing is available to foreign buyers. However, the conditions are not the same as those applied to residents.

1. Stricter conditions for non-residents
As a rule, residents can obtain financing of up to 90% of the property value. Non-resident foreigners are normally limited to 80%, and this may fall to 70% or 60% depending on the risk profile. Loan terms are also shorter: up to 30 years, even for younger buyers. The initial down payment tends to be significantly higher.

2. Additional mandatory documentation

Banks require:
• a Portuguese Tax Identification Number (NIF)
• appointment of a tax representative
• proof of income and bank statements
• tax return from the country of origin
• proof of employment or professional link
• international credit history (where applicable)

The more fragmented the documentation, the longer the approval process is likely to take.

3. Longer process and more rigorous analysis
When the main source of income is from abroad or there is no prior employment link to Portugal, banks carry out additional checks, which extend the decision period.

4. Costs and taxes
Foreigners pay the same taxes as residents (IMT – Property Transfer Tax – and Stamp Duty). In 2025, a possible IMT surcharge for non-residents is under discussion as a way of containing speculative pressure.

This is an area to watch closely.

5. Special conditions for those who live in Portugal legally
Foreigners who are legally resident in Portugal may benefit from the same conditions as Portuguese nationals, including access to financing up to 90%, longer terms, and the possibility of 100% financing in special schemes for young buyers up to 35 years old with at least two years of legal residence. Active tax residency in Portugal makes a significant difference.

Conclusion

Real estate financing in Portugal has changed and has become more demanding. For development projects, the combination of stricter banking rules, ESG criteria, and the need for solid planning documentation requires meticulous preparation. For foreigners who want to buy a home, conditions remain attractive, but with tighter requirements and greater scrutiny.

Having a specialised lawyer at your side is not just a recommendation; it is a critical factor to ensure legal certainty, avoid delays, negotiate better terms, and protect the investment at every stage.

MATLAW supports developers, investors, and international buyers throughout the entire financing and acquisition process. If you are planning a project or a purchase in Portugal, we are ready to assist you at every step with rigor, clarity, and legal security.