Often the main reason that Borrowing Interest is low for a Development file in Feastudy Professional, when program users expect Borrowing Interest to be much greater, is that they project their Sell-On Income occurring too soon relative to the timing of their development costs, like Land Costs and Construction Costs. They also may have Equity injected into the cashflow and may not have taken account of the mitigating effect that Equity has on Borrowing Interest. Thus it is important to check the timing of all Costs, Incomes, Equity and Debt and enter the correct dates for these data items to have the program calculate the correct monthly and total amounts of Borrowing Interest for your Development scenarios.
Borrowing Interest is an interest cost (which is usually paid to a financial institution) and is calculated for those months in which the cashflow has a cumulative debt. The opposite is Lending Interest, which is for interest income when the cashflow is in surplus (i.e. for those months where total equity plus total incomes to date is greater than all costs, including borrowing interest costs, to date).
With regard to Australian real estate developments, it is usually (if not always) the case that deposits and settlements from sales of components of the developed property cannot be realised by the developer until after those components have new certificates of title, which can only be issued after a relevant certificate of practical completion for the said components is given by a relevant professional. For example, we do not know of a specific Australian case where the deposits for development sales have not been paid into a conveyancer's trust account and therefore these deposits are not available to be offset against debt finance and/or reduce interest costs payable to a development financier until settlement of the relevant sales. Thus it is our policy at Devfeas Pty Ltd to suggest to Feastudy users, who study proposals for one-stage-only developments of Australian property and ask us why their Borrowing Interest is low when they have their Sell-On Income occurring before the last End Date for their Construction Cost item(s) in their studies, that they consider making each entered start date of their Sell-On Income items for all newly developed component(s) at least one month later than the said last End Date.