Some apartment developers in NSW will be able to start construction without meeting the traditional 80% pre-sale threshold, thanks to the state government’s new Pre-Sale Finance Guarantee program.

The $1 billion initiative removes one of the biggest obstacles facing the housing industry by using the government’s credit standing to help developers secure commercial construction finance. Under the program, the government commits to purchase up to 50% of homes in approved developments if pre-sale targets aren’t met, giving lenders the confidence they need to release funding.

PERIFA’s $285 million Rozelle Village has become the first project to benefit, with construction of 225 apartments now moving forward sooner than would otherwise be possible, according to a story in Apartments.com.au.

The government guarantee covers 32 affordable homes in the development, allowing PERIFA to secure finance while it finalizes arrangements with a community housing provider.

“The challenge of meeting pre-sale requirements is one of the most common issues cited by stakeholders in securing finance,” according to the government announcement. The NSW Productivity and Equality Commission has identified this as a key hurdle preventing approved projects from breaking ground.

The guarantee arrangement is designed as a safety net rather than an expense. Developers still pursue commercial pre-sales, but the government’s commitment to step in if needed satisfies lender requirements. If the guarantee isn’t ultimately needed, the government spends nothing.

Since launching in October, the program has attracted 31 expressions of interest from developers across NSW. A third have already been invited to submit full applications, with over $100 million in pre-sale commitment requests currently under assessment. If approved, these projects would deliver more than 350 new homes across metropolitan Sydney and regional NSW.

The program supports individual projects with guarantees ranging from $5 million to $50 million, for homes valued up to $2 million each. Only developers meeting strict criteria for credibility, capability and capacity are approved.

Treasurer Daniel Mookhey described it as “a smart use of the State’s balance sheet” that moves approved projects “from paper to construction” by providing “the confidence the market needs to secure finance and start construction, without the Government having to spend a dollar upfront.”

The revolving fund structure means the $1 billion allocation can support pre-sales across multiple projects over the next five years as earlier guarantees are released.