Which QS Report Does Your Bank Actually Need

By Coba Pekaj, MAIQS CQS - Director, Pekaj Group

Your broker calls and says the bank needs a "QS report." You say no problem. But which one?

This is one of the most common points of confusion in Australian construction finance. The term "QS report" gets thrown around as if it means one thing. It does not. There are four distinct report types, each designed for a different stage of your project and a different audience. Getting the wrong one wastes time, costs money, and can delay your loan approval.

This guide breaks down all four in plain English so you know exactly what to ask for and when.

The four report types at a glance

Before we go into detail, here is the quick reference.

Stage 1 - Feasibility Estimate

This is the starting point. You have found a site, the vendor has included town planning drawings in the contract of sale, and you want to know whether the numbers work before you commit.

A Feasibility Estimate takes those TP drawings and produces a high-level construction cost using benchmark rates per square metre. It then wraps that cost inside a basic development feasibility covering professional fees, statutory charges, finance costs, selling costs, revenue, and margin. The output tells you whether the project makes money or whether you should walk away.

This report is for you, not the bank. No lender is involved at this stage. No builder has been engaged. The accuracy sits around plus or minus 20 to 25 percent, which is appropriate given you are working off concept-level drawings with no engineering or specifications.

A common mistake is skipping this step and going straight to detailed design. If the feasibility does not stack up at concept stage, spending $50,000 on consultants will not fix it. Test the numbers first.

What you need to provide:

What the report does not cover: builder capability, insurance assessment, contract review, conditions precedent, or drawdown schedules. None of these exist yet at this stage.

Typical fees for a 4-unit townhouse site: $3,000 to $6,000 plus GST.

Stage 2 - Elemental Cost Plan

You have committed to the site, engaged an architect, and now have working drawings and specifications. You need a reliable construction budget before you go to tender or engage a builder.

An Elemental Cost Plan takes those drawings and produces a measured estimate. Quantities are derived from the plans and priced against current market rates. The estimate is broken down by building element: substructure, superstructure, finishes, fittings, services, external works, preliminaries, and margin.

This is still a developer tool. It answers one question: what does this building cost to construct? It does not cover land, finance costs, selling costs, or revenue. It is not addressed to a bank and carries no formal reliance from a lender.

The accuracy improves to plus or minus 10 to 15 percent because you now have real drawings to measure from.

What you need to provide:

What the report does not cover: development feasibility, builder assessment, insurance review, lender due diligence, or drawdown schedules. This is construction cost only.

Typical fees for a 4-unit townhouse development: $4,000 to $6,000 plus GST.

Stage 3 - QS Bank Report

This is the one most brokers are actually asking for when they say "the bank needs a QS report" on a residential construction loan.

You have a signed contract with a builder, working drawings, and a construction loan application in progress. The bank wants an independent professional to confirm that the builder's price is fair and reasonable and that the payment stage schedule is not front-loaded.

A QS Bank Report reviews the contract and quotation, verifies the construction cost against current market rates, checks the payment stages, and provides the lender with a recommendation. It is simpler than a full IFR and is designed for single homes, renovations, duplexes, and small residential projects where development finance is not involved.

This report is addressed to the lender and carries limited professional indemnity reliance. The bank uses it to decide whether they are over-lending or under-lending.

What you need to provide:

What the report does not cover: full development feasibility, detailed trade-by-trade independent estimate, consultant PI review, builder WIP assessment, or conditions precedent register. Those belong in the IFR.

Typical fees for a single dwelling: $1,500 to $2,500 plus GST. Dual occupancy: $2,000 to $3,500 plus GST.

Stage 4 - Initial Financier's Report (IFR)

This is the big one. If you are seeking development finance for a multi-unit, commercial, or mixed-use project, this is the report the lender requires.

An IFR is a comprehensive document covering every aspect the bank needs to approve the facility. It includes an independent cost assessment, building contract review, builder capability and registration check, insurance verification, consultant review, authority approvals, development budget reconciliation, drawdown schedule, conditions precedent, and risk assessment. It is structured to meet the Australian Institute of Quantity Surveyors (AIQS) 4th Edition requirements and must be prepared by a Certified Quantity Surveyor (CQS).

The IFR is not just a cost document. It is the control document for the entire construction phase. The cost estimate established in the initial report becomes the baseline against which every subsequent monthly drawdown is assessed for the duration of the build. When the builder submits a progress claim six months into construction, it is measured against the IFR.

The bank relies on this report to answer three questions. Can the project be built within the stated cost? Is the builder capable of delivering it? Are there sufficient funds, including contingency and capitalised interest, to see the project through to completion?

What you need to provide:

Items marked as Conditions Precedent (CP) are blocking. They must be resolved before the lender will release the first drawdown. Common CPs include the signed building contract, trade breakdown, workers compensation insurance, contract works insurance, public liability insurance, domestic building insurance (in Victoria), and the building permit.

A note on non-bank lenders: firms like Qualitas, MaxCap, and Metric typically require more detail than the Big 4 banks, not less. This may include funding table reconciliation, capitalised interest verification, and equity waterfall documentation. Fees for non-bank IFRs often sit at the upper end of the range.

What the lender actually does with the report

This is worth understanding because it explains why the bank asks for so much documentation.

The QS report must reconcile with the valuation report and the lender's own funding table. If the QS says the project costs $4 million but the valuer says the completed value is $3.8 million, the lender has a problem. If the QS cost estimate does not match the builder's contract sum, the lender needs to understand why.

During construction, the QS assesses each builder claim on a cost-to-complete basis. This means the QS does not just look at what work has been done. They check whether the remaining loan balance is enough to finish the project. If the remaining budget is tight, the QS may recommend a lower drawdown than the builder has claimed. This protects all parties from a scenario where the project runs out of money before it is finished.

This can create tension with builders who expect payment for work performed. But it is the fundamental mechanism that protects the lender, the developer, and ultimately the builder from a project that stalls mid-construction.

Two things builders should know about insurance

Insurance is one of the most common red flags in QS reports. Two issues come up repeatedly.

First, the lender will not accept generic insurance. The contract works insurance must be site-specific and must name the lender as an interested party. If the builder has a blanket policy that covers "all projects" but does not reference the specific site address, the QS will flag it as a condition precedent that blocks drawdown.

Second, most lenders will not fund materials until they are fixed on site. This catches builders off guard, particularly with items like lifts, precast panels, and custom joinery that require large upfront deposits to manufacturers. The QS monitors unfixed materials at every drawdown stage. Builders should plan their cashflow around this and discuss it with the developer early.

How the reports connect

Each report nests inside the next. A feasibility estimate becomes the cost plan becomes the IFR as documentation develops.

If you commission a feasibility and later upgrade to an IFR on the same project, we credit 50 percent of the feasibility fee against the IFR fee. You are not starting from scratch at each stage

Does the QS need to be on the bank's approved panel?

In most cases, yes. The major banks and non-bank lenders maintain approved panels of quantity surveyors. If the QS is not on the panel, the report may not be accepted regardless of its quality.

Before engaging any QS for a bank-facing report, confirm with your broker or lender that the firm will be accepted. This step is essential and should happen before any work begins. A rejected report means re-engaging a different firm at additional cost and delay.

Panel requirements typically include AIQS membership, Certified Quantity Surveyor (CQS) designation and a minimum level of Professional Indemnity insurance. However even this may not be enough ask the lender directly before work commences.

During construction - progress drawdown reports

Once the IFR is issued and the construction facility is drawn, the lender requires ongoing monitoring. The QS assesses each builder claim, verifies works completed, calculates cost to complete, and recommends or withholds the drawdown amount.

Progress reports are a separate service quoted per inspection. They are the recurring component of the QS engagement and continue monthly for the duration of construction.

What the builder needs to provide with each claim:

How long does each report take?

These turnaround times are measured from receipt of complete documentation. Incomplete submissions will delay the report. We acknowledge receipt within one business day and advise immediately if anything is missing.

Desktop assessment and site inspections

All Pekaj Group reports are prepared on a desktop basis. We do not conduct physical site inspections. Where site inspections are required as part of the initial assessment or progress drawdown process, an independent and reputable third-party quantity surveyor is engaged to complete these services on our behalf.

This arrangement is disclosed to all parties and does not diminish the quality, independence, or reliability of the reporting. The desktop cost analysis, drawdown recommendation, and report compilation are performed by Pekaj Group. The site verification is performed by the appointed third party.

The bottom line

If a broker tells you the bank needs a QS report, ask two questions.

What type of lending is it (residential construction loan or development finance)? And what documentation does the borrower have available right now?

The answers will tell you which of the four report types is needed. Get it right the first time and the finance process moves faster for everyone.

If you are unsure which report applies to your project, contact us and we will tell you 1300 420 227.

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