Construction funding
Draws, interest during construction, fees, equity.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: construction funding.Updated 30 September 2026
Part of real estate models, with the models, labs and guides around it.
Part of project finance and infrastructure models, with the models, labs and guides around it.
What it does
The construction phase has no revenue and heavy outflows. Capex is drawn against a programme; debt is drawn alongside it; interest during construction accrues on the drawn balance and, with the commitment fee on the undrawn balance and the arrangement fee, is capitalised into the project cost; equity funds whatever the debt does not. Sources equal uses in every period, and the check says so. A real estate development funds the same way with one difference lenders insist on: equity goes in first, to its share of the budget, before the construction loan draws.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 6–9: Period number, Construction periods, Debt tenor, Operating periods
- Assumptions, rows 12–15: Construction cost, excluding financing, Construction draw profile, Arrangement fee, Commitment fee, annual
- Construction, rows 6–10: Construction period flag, Period number, Operating period flag, Operating period number…
- Construction, rows 13–20: Construction cost drawn, Senior debt drawn, Senior debt drawn, cumulative, Interest during construction…
- Construction, rows 23–25: Senior debt, Sponsor equity, Check: sources - uses
- Construction, row 28: Capitalised project cost, cumulative
- Assumptions, rows 29–30: Construction loan: maximum loan to cost, Construction loan: interest rate, % a year
- Funding, rows 6–9: Development cost in the quarter, Equity requirement, Equity drawn, Construction loan drawn
- Funding, rows 12–21: Construction loan, opening, Construction loan interest, Interest paid from NOI, Interest capitalised…
- Assumptions, rows 6–8: Years from financial close, Operating year flag, Operating year
- Assumptions, rows 11–15: Design and build contract, Construction draw profile, Development and bid costs, Senior debt gearing…
- Construction, rows 6–10: Construction draw, Development and bid costs, Interest during construction, Arrangement fee…
- Construction, rows 13–18: Senior debt drawn, Capitalised interest, Sponsor equity, Total sources…
What a reviewer looks for
- Interest during construction on the closing balance.
- Equity drawn first in the model when the documents say pro rata, or the other way round.
- A contingency line missing or too small.
Learn it, then build it
Vocabulary: Interest During Construction (IDC), Sources and Uses.