Development

How many units must be pre-sold before construction starts?

26 June 2026Updated 4 July 202613 min readBy Raphael Mwito

Editorial illustration / Development

Direct answer

The argument in brief.

A project should be pre-sold far enough to satisfy the lender’s conditions, demonstrate real buyer demand, and close the funding gap after allowing for cancellations and deposit timing. The correct threshold is therefore a financing calculation—not a generic percentage of units.

Pre-sales are not applause from the market. They are a test of whether the project has enough committed demand to carry construction risk.

Many residential projects describe pre-sales as a percentage target: 30%, 40%, 50%. That number is useful, but incomplete. A proper pre-sales requirement should explain why that threshold exists and what risk it is covering.

The number may come from a lender covenant, a cash-flow gap, a buyer-deposit requirement, or a confidence test before the developer signs a construction contract. The danger is treating all reservations as equal when only binding, funded, resilient sales should be allowed to support the start decision.

Direct answer

What is a pre-sales requirement?

A pre-sales requirement is the minimum value or number of binding unit sales a development needs before construction start or funding drawdown. It helps protect the project from weak demand, funding gaps, buyer cancellations, and premature construction commitments.

The four gates.

Lender condition

The minimum sales value or percentage of GDV required before the lender allows drawdown or construction start.

Funding gap

The cash shortfall after committed equity and debt are compared with the uses that must be covered at start.

Deposit quality

The buyer cash that remains after commissions, legal leakage, and expected cancellations.

Sales velocity

Whether the team can realistically achieve the required number of binding sales before the intended start date.

What the model should output.

Required pre-sales as a percentage of GDV.
Required number of binding unit sales.
Net deposits collected after sales costs.
Funding cover ratio after deposits.
Monthly sales pace required before construction start.

Worked example

Turn a percentage covenant into units, deposits, and time.

Assume a 100-unit apartment project with a gross development value of KES 1.20 billion. The lender requires 35% of GDV to be covered by qualifying pre-sales. The average unit price is KES 12 million, buyers pay a 15% deposit, and the developer expects 10% of signed sales to cancel or fail the lender's eligibility test.

Gross development value

KES 1.20bn

The value of all units at the tested achieved prices.

Lender pre-sale condition

35% of GDV

KES 420m of binding sales must be evidenced before drawdown.

Average unit price

KES 12m

The covenant translates to 35 average-priced units before buffers.

Expected cancellation rate

10%

The sales target rises to 39 units so that roughly 35 remain binding.

Net buyer deposit

15%

Those 39 sales provide about KES 70.2m before timing and eligibility tests.

Time to planned start

8 months

The project needs about five resilient net sales per month.

The binding constraint is sales velocity.

The headline answer is not merely “35% pre-sold.” It is approximately 39 gross sales, producing 35 resilient qualifying sales, achieved at roughly five net sales per month before the planned start. If the observed pace is three sales per month, the programme and funding plan are inconsistent even though the project may still show a healthy development margin.

Decision responses

A failed start test should change the project—not the arithmetic.

Rephase

Start a smaller first phase whose debt, equity, and pre-sale requirement match demonstrated demand.

Reduce exposure

Delay non-critical packages, preserve termination rights, or separate enabling works from the main contract.

Improve the offer

Revisit unit mix, ticket size, payment plan, specification, and buyer proposition rather than simply increasing promotion.

Change the capital plan

Add equity, resize debt, negotiate covenant mechanics, or use deposits only where they are legally and practically available.

Start discipline

A conditional start is still a risk decision.

If the calculator says a project needs 42% of GDV pre-sold but current velocity only gets to 28% before start, the answer is not automatically “cancel.” It may be revise phasing, reduce exposure, delay the main contract, improve pricing evidence, or negotiate a different funding condition.

Calculate the threshold

Read the real estate feasibility guide →

Sources and notes

Evidence behind the argument.

Bank Supervision Annual Report 2024

Central Bank of Kenya

Context on lender risk assessment, mortgage markets, repayment capacity, and property finance conditions.

2023/24 Kenya Housing Survey

Kenya National Bureau of Statistics

Official housing-market evidence covering tenure, affordability, prices, demand, and property transactions.

Related tool

Pre-Sales Requirement Calculator

Related essay

Architecture after the feasibility