Land acquisition, development and construction

1. Land acquisition, development and construction (ADC) refers to property exposures where the security for the loan predominantly relates to any of the land acquisition for development and construction purposes, or development and construction of any residential or commercial property.
2. All property exposures where the predominant property security is not fully completed must be included as ADC unless:
   1. the property is used predominantly for forest or agricultural purposes; or
   2. the loan is secured by residential property under construction, or by land upon which residential property will be constructed, where the property will be the primary residence of the borrower.
3. An ADI may apply a risk weight of 100 per cent to its ADC exposures secured by residential property if the following conditions are met:
   1. the exposure meets all of the requirements in paragraphs 3, 4, 6 and 7 of this Attachment;
   2. total debt to qualifying development costs are less than 75 per cent, where debt includes all debt facilities held by the borrower in relation to the underlying property;
   3. where the exposure to the borrower is greater than $5 million in aggregate for a single development, qualifying pre-sales for the underlying property are at least equal to 100 per cent of the total debt; and
   4. the ADI has a policy that defines qualifying pre-sales and qualifying development costs for the purpose of meeting the requirements under paragraph 29 of this Attachment.
4. An ADI must apply a risk weight of 150 per cent to all other ADC exposures.