CommBank Will Release 80% of a Prefab Build Before It Reaches the Block. Land Equity Is What Actually Sets the Limit

1. What actually changed this month

PrefabAUS — the peak body for prefabricated and offsite construction — has launched a Standard Form Contract for Class 1 Domestic Construction, reported on 9 September by both Wood Central and Australian Manufacturing. Wood Central places the launch at the Offsite26 event in Melbourne. Class 1 is the National Construction Code classification for residential dwellings such as detached houses and townhouses, so this is squarely a residential document. The contract was developed with Commonwealth Bank sponsorship, and both outlets report that it is open to any lender, not only the sponsor.

The change it makes is unglamorous and important. Conventional residential building contracts stage payments against site-based progress: slab, frame, lock-up, fixing, completion. A factory-built home does not pass through those stages in that order, or on that site. The PrefabAUS contract stages payments against manufacturing milestones instead.

On 25 September, CommBank published a piece on factory-built housing in which Rebecca Markwell, its General Manager of Home Buying, confirmed the lending side: “We’ve already introduced changes to our lending policy to better support prefabricated housing, including enabling progress payments during the offsite construction phase.” Markwell also said that “modern methods of construction have the potential to help address Australia’s housing shortage by delivering homes faster.”

For brokers, that pairing is the story. A contract the lender’s credit team recognises, plus a published policy that funds work done in a factory, is the first time this has been a placeable proposition at a major bank rather than a case-by-case argument.

2. The security problem prefab has always had

It is worth being precise about why lenders resisted, because the reason has not gone away — it has been priced into the policy.

Under a standard construction loan, the lender’s security is the land, and the value of that security grows as the building is fixed to it. A module sitting on a factory floor is not fixed to anything. CommBank’s own prefab home loan page is direct about what this means: where progress payments are requested before the prefab home is affixed to the land, “the land will be used as the sole security”.

So every dollar released during the offsite phase is a dollar advanced against the land alone. If the manufacturer fails mid-build, the lender is holding a block of dirt and a contractual claim. That is the exposure the policy is built to contain, and it is why the policy has two caps rather than one.

3. The policy in numbers — and the cap brokers will miss

CommBank’s prefab home loan page sets out two pathways. On both, the lesser of the two limits applies:

CommBank’s July 2025 newsroom announcement of the policy added a dollar ceiling on the assessed pathway — up to 80% of the fixed-price contract to a maximum of $1.5 million, or 150% of land equity, whichever is lower — and noted that under the previous policy customers had to fund up to 90% of upfront costs. The prefab product page as it reads now sets out the percentages and the land-equity multiples without restating that dollar cap, so confirm the current ceiling with the bank before you quote it.

The remaining funds release after the home is permanently affixed to the land and connected to services.

4. Three worked files

The arithmetic below is The Broker Times‘ own illustration of the published percentages, not a quote from any lender, and it ignores site costs, fees and the order in which the contract stages payments. Assume a $420,000 fixed-price build contract in each case.

File A — client owns the land outright

Land worth $350,000, no debt against it. Land equity is $350,000. On the assessed pathway, 80% of the contract is $336,000; 150% of land equity is $525,000. The lesser figure is $336,000. The percentage binds, the client funds the $84,000 balance of the build before affixture, and the headline number means exactly what it appears to mean.

File B — same build, land bought at 80% LVR

Land purchased for $350,000 with a $280,000 loan. Land equity is $70,000. Now 80% of the contract is still $336,000, but 150% of land equity is $105,000. The lesser figure is $105,000. The client has to find roughly $315,000 of the build cost before the home is affixed to the block. For most first-home buyers and most upgraders, that ends the conversation.

File C — File B, but the manufacturer is not on the assessed list

60% of the contract is $252,000; 120% of land equity is $84,000. The lesser figure is $84,000. Note what that comparison shows: moving from an assessed to a non-assessed manufacturer costs this client $21,000 of released funds. On File A’s land position, the same switch would cost $84,000 — $336,000 against $252,000.

5. The rule of thumb: land equity at roughly half the build

You can find the crossover point on the back of a file note. On the assessed pathway, 80% of the contract equals 150% of land equity when land equity reaches about 53% of the build contract. On the non-assessed pathway, 60% equals 120% of land equity when land equity reaches 50% of the contract.

So the working heuristic is this: until your client’s land equity is roughly half the build contract, the percentage in the headline is not their number. Above that line, it is. That single check tells you in seconds whether a prefab enquiry is a live file or a conversation about funding a large cash gap.

6. Why this moves the decision upstream to the land purchase

This is the strategic implication, and it is where brokers can add value no comparison table will.

If the offsite release is governed by land equity, then the structure of the land purchase determines whether the prefab build is financeable at all — and that decision is usually made months before anyone mentions modular. A client who gears the land to 80% to preserve cash has, without knowing it, capped what any lender following this style of policy will advance while their house sits in a factory.

Which means the prefab conversation belongs at the land enquiry, not at the build enquiry. When a client tells you they are buying a block in regional Victoria and “might do something modular later”, that is the moment to model the equity position. The practical levers are the obvious ones — a larger deposit on the land, retaining equity rather than drawing it down, using an existing unencumbered property in the security position — but they only work if they are considered before settlement.

There is a second-order point worth noting for anyone writing construction: this policy shape rewards clients with equity and penalises clients with cash-flow. That is the opposite of how a standard construction loan behaves, where progress payments track the build and the deposit does the work. Brokers who assume prefab behaves like construction will misprice the file.

7. What the Assessed Manufacturers list is — and is not

CommBank’s Assessed Manufacturers list identifies prefab builders that meet the bank’s eligibility criteria, and it is what unlocks the 80%/150% pathway. Manufacturers wanting to be considered are directed to contact the bank at BBPrefabManufacturers@cba.com.au.

What it is not is an endorsement. CommBank’s July 2025 announcement states plainly that it does not endorse, recommend or guarantee the services, quality or financial stability of any assessed manufacturer, and that customers are responsible for their choice of manufacturer.

That distinction matters to you. If a client hears “the bank has approved this builder” and you let that stand, you have allowed a credit-eligibility assessment to be read as a quality assurance. Manufacturer insolvency risk is the central risk in offsite construction — the lender has structured its policy around exactly that risk — and it remains the client’s risk to carry. Record what you told them.

8. Where the demand is coming from

Australian Broker reported on 28 September that demand is strongest in regional Victoria and New South Wales, where local builders are carrying multi-year backlogs. That is a specific and useful piece of targeting: the prefab proposition sells hardest where the alternative is a two-year wait, not where it is a cheaper build.

Lester Raikes, Managing Director of Anchor Homes, described modular homes to Australian Broker as “affordable rather than cheap”, and told CommBank that “with our build process, we’ve had customers move into their new home within months of signing their contract.” CommBank’s September piece puts the factory build at between eight and 12 weeks, completing 80 to 90 per cent of the home offsite, and notes Anchor Homes says about 60 per cent or more of its homes are variations on a standard plan.

The macro backdrop supports the structural case. The ABS Building Activity, Australia release for the March 2026 quarter records 243,864 dwellings under construction, with commencements down 11.2% over the quarter to 48,012 and completions down 0.4% to 43,816. The National Housing Supply and Affordability Council’s August 2026 quarterly report describes the 244,000 dwellings under construction as the highest result since records began in 1984, puts completions since the Accord began at 308,000, and now expects the 1.2 million home target — originally set for 1 July 2029 — to be reached in the December quarter of 2030. The Council also notes New South Wales is pursuing modern methods of construction, including a new manufacturing facility and regulatory framework.

A pipeline that deep and that slow to clear is the commercial argument for offsite construction. It is also a reason to expect more lenders to publish prefab policies, and worth watching.

9. Best interest duty on a prefab recommendation

General information, not compliance advice — check the detail with your licensee. But the shape of the obligation is not hard to see.

Best interest duty obligations apply to credit assistance for consumer credit, and a prefab recommendation puts two things in front of you that a standard construction recommendation does not: a materially different funding profile, and a lender panel where very few options may exist at all. Both are worth a file note.

Practically, the things most likely to be asked about later are whether the client understood the cash they would need before affixture, whether you explained that the assessed-manufacturer status was a credit criterion rather than a quality guarantee, and whether you considered the alternatives — including a conventional build or a completed home — rather than defaulting to the one lender you knew had a policy. If your panel realistically offers one prefab-capable lender, say so in the file rather than presenting a single option as a comparison.

Your licensee or compliance adviser is the right place to settle how your own process should document this, and the obligations sit under the National Consumer Credit Protection Act 2009.

10. Your checklist for this week

1. Pull the current policy yourself. Read CommBank’s prefab home loan page and confirm the percentages, the land-equity multiples and whether the $1.5 million ceiling from the July 2025 announcement still applies. Do not quote figures from a news article to a client.
2. Run the half-the-contract test on any live prefab enquiry. Land equity below roughly 50% of the build contract means the multiple binds and the client has a cash gap to fund.
3. Check your existing land-only files. Any client holding vacant land with a build ahead of them is a prefab conversation, and the equity position is the first thing to model.
4. Ask your aggregator which panel lenders have a published prefab or modular position. If the answer is one, that is a fact for your file note, not a gap to paper over.
5. Get the PrefabAUS standard form contract. It is designed to be used regardless of which lender funds the deal, which makes it the document to put in front of a credit assessor who has not seen a prefab file before. PrefabAUS is the source.
6. Write the manufacturer-risk conversation into your process. One paragraph, consistently applied, covering insolvency risk and what assessed status does and does not mean.
7. Set your referral targeting on backlog, not price. Regional Victoria and New South Wales, where builders are quoting multi-year waits, is where the eight-to-12-week factory build wins.

Where this lands

Prefab has spent years stuck behind a problem that was never really about construction quality. It was about security, and about contracts written for a build that happens in one place. A standard form contract and a published lending policy address both, which is genuine progress and worth understanding before your competitors do.

But the policy that made prefab financeable also made it a product for clients with equity in their land. Brokers who read only the headline percentage will quote a number their client cannot get and lose the file at the worst possible moment — after the client has signed with a manufacturer. Brokers who read the second cap will have the land conversation early, structure the purchase to suit, and be the reason the build happens at all.

That is the whole of the opportunity here: not a new product to sell, but a constraint you can see before the client does.