Rising build costs and the challenge of contingency planning

One of the biggest hurdles for developers in 2025 is the unpredictability of build costs. While materials inflation has eased compared to 2022–23 peaks, contractors continue to price in risk, leading to higher-than-expected quotes and wider tender spreads.

For lenders, this creates a real challenge. Contingency planning has become more important than ever, with banks increasingly requiring 5–10 percent contingency built into budgets and ringfenced from day one. Developers are often frustrated when lenders resist releasing this contingency, even when overruns are legitimate.

Specialist finance providers tend to offer more flexibility, but they too must balance the risk of erosion to equity and debt coverage. The best developers are approaching this proactively by allowing longer preliminaries, running detailed cost reviews with multiple contractors, and being realistic about the likelihood of cost pressure during the build.

Ultimately, the message is clear: robust contingency is not a sign of weakness in a scheme, but of strength. Developers who embrace this reality, and present well-considered budgets to lenders, are more likely to secure support and deliver projects on time. At Imperial Blue Finance we offer loans that take a pragmatic approach to contingency, structured so funds are available when genuinely needed without creating unnecessary obstacles.