Since the last bubble burst, lenders tightened their grip on real estate financing. When individuals request a mortgage, banks now demand substantial equity—often 20% or more of the property price. Before 2008, buyers could borrow nearly the full cost or even exceed it, enjoying a kind of credit holiday after the purchase. The same shift hit developers who buy land, design buildings, and sell homes. Banks now require developers to fund more of the project with their own capital rather than relying on debt.
This tightening opened a space for debt funds to rise as a new player in real estate markets. These funds are not villainous instruments for foreclosures or rapid home purchases. They act like lenders, but specialize exclusively in real estate. They aim to meet capital needs for projects banks overlook or avoid. Many investors want to acquire assets, yet the financing landscape has become too narrow. As Stronghold’s CEO Eduardo Richi notes, there has been a real funding gap.
Stronghold is a debt fund established in 2019 through a collaboration between Irish and British partners. It holds a credit line of around 100 million euros from Goldman Sachs, a North American investment bank. The company engages in lending for home construction and provides bridge loans for real estate deals. As the CEO explains, the firm began working with non-institutional investors like trusted family offices to secure capital and scale operations.
Another player set to tally numerous transactions in the near term is Velox Finance, backed by European and Israeli corporate funds and family offices. Velox specializes in housing development and rehabilitation. Its general manager, María Pérez del Valle, describes Velox as a young fund filling a financing gap. The plan is to invest about 100 million euros in 2023, offering loans from 750,000 euros up to 5 million for small to mid-sized projects. She notes that many funds provide substantial sums, but smaller developers struggle to find support for their initiatives.
Loans are increasingly more expensive than traditional bank credit. A small contractor from a major publishing group explains that Spanish banks now require presales of 50% to 80% before construction begins and often do not offer developer loans below 1.5 million euros, nor do they cover the full project cost. Banks demand solid guarantees, which puts pressure on builders and developers. National lenders quote Euribor-based debt, with spreads typically ranging from 2% to 3%.
In contrast, debt funds tend to accept smaller upfront pre-sales, sometimes around 50% or even less if the project location is ideal. They also maintain higher minimum ticket sizes and prefer to finance larger scales, typically starting at around one million euros because finances below construction costs hinder profitability.
Velox Finance reports lending rates between 9% and 14%. Pérez del Valle explains that converting a large apartment complex for sale one unit at a time in Madrid approaches 9%, while greenfield construction sits nearer 14%. Stronghold, for its part, claims no fixed pricing. The text notes that where banks offer 4% financing, the fund often charges 8% or 9%, and where banks quote 6% or 7%, Velox might be 11% or 12%, reflecting roughly five percentage points above standard bank rates. It is also acknowledged that not every opportunity is approved; roughly nine out of ten deals may be rejected.
Difference with bubble-era debt funds is highlighted by Stronghold’s managing director. He explains that older debt funds were opportunistic, focused on large corporate or big bank acquisitions. The current approach centers on financing and preventing defaults, with a smaller operation size and a focus on supporting smaller developers. The emphasis is on collaboration and clear, straightforward terms. A general manager from Velox adds that alternative financing can be seen as a partner rather than a last resort, sharing profits through the project’s success. Velox claims it accounts for about 17% of the market, with higher shares in the United States or the United Kingdom, reaching about half in those regions. As financing pulls back from traditional banks, more entrepreneurs are expected to turn to alternative funding that promises significant growth potential. Velox asserts ample capital to back dozens of deals in the near term [citation: Velox and Stronghold statements].
Overall, the real estate debt fund landscape has shifted from the post-crisis era toward a more active role in scaffolding development when conventional banks pull back. The emphasis remains on financing projects with a clear path to profitability, while offering terms that align with the realities of modern development markets. Market participants caution that while debt funds present attractive options, prudent evaluation and risk management are essential as interest rates, project risk, and location all influence outcomes. Investors and developers alike continue to weigh the balance between speed, access to capital, and long-term viability in a financing environment that favors adaptable, well-structured partnerships [citation: market analyses].