Glossary · Real estate finance
Forward Funding: Definition, Process and Distinctions
In forward funding, the investor gets in before it is built – the developer gains early liquidity, the investor secures the finished property.
Last updated: 18 July 2026 · Reviewed by Jürgen Kronawitter
How does a forward-funding transaction work?
Typically, the investor first acquires the property from the developer and then pays the construction and development costs in installments according to construction progress – similar to the rate logic of the MaBV, but freely negotiated. The developer remains responsible for planning, construction and often also initial rental and provides for completion, cost and partly rental guarantees. Upon completion and acceptance, the property passes completely to the investor; a success-dependent final payment honors the rental status and quality.
Benefits and risks for both sides
- Developers: early relief of land and construction costs, reduced need for Equity and interim finance, secured exit – in return for part of the margin and assumption of guarantees.
- Investor: Access to new build quality and product, which is hardly available on the existing market, purchase below the expected completion value – in return, development and completion risks, which must be hedged by warranties, withholdings and milestones.
Forward Funding vs. Forward Purchase – and the financing
For an Forward purchases (Forward Deal) the property is also sold before completion, but the purchase price flows only on handover – the developer has to finance the construction phase himself, for example via a Property development finance with Mezzanine building block. Forward funding replaces part of this project financing with investor capital. Which structure is more economical depends on margin, interest rate level and risk distribution – we structure both variants and accompany the lenders or investor approach within the framework of our Debt advisory.
Frequently asked questions
Forward Funding – briefly answered
What Is the Difference Between Forward Funding and Forward Purchase?
With forward funding, the investor pays already during the construction phase after construction progress; with forward purchase, the purchase price flows only upon completion. Forward funding relieves the developer’s project financing much more.
For which projects is Forward Funding suitable?
Especially for high-volume residential and commercial developments with a clear product profile, where institutional investors are looking for planning certainty early on – such as apartment buildings, districts or logistics.
Does the developer still need financing for forward funding?
Usually yes, but significantly less: Purchase of land before signing, planning phase and cost peaks are still financed interim – for example via Bridge Loans or mezzanine capital.
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About the author
Jürgen Kronawitter
Jürgen Kronawitter specialises in structured real estate finance. He helps property investors, developers and portfolio owners implement complex financing solutions. His work focuses on structuring and arranging senior loans, whole loans, mezzanine capital and bridge loans, as well as tailored financing for acquisitions, investment properties, developments and refinancing.