PrefabAUS has released a standard form contract that ties payments to factory milestones rather than site stages. It fixes a real gap in how factory built homes are paid for. It does not change who carries the risk while the house sits in a factory.
On a conventional build, the money follows the house.
The slab goes down, the frame goes up, and a progress payment is released against work sitting on land the lender already holds as security.
A factory built home breaks that sequence. Most of the work happens somewhere else, weeks before anything reaches the block, and the manufacturer needs to be paid while it happens.
In early September, PrefabAUS released a standard form contract designed around that problem. It is the PrefabAUS Standard Form Contract for Class 1 Domestic Construction, covering single detached homes, and it was developed through sponsorship by the Commonwealth Bank.
What the PrefabAUS contract actually does
According to PrefabAUS, the contract sets payment stages that reflect how a prefab home is designed, manufactured, transported and completed. CommBank has described those stages as tied to key manufacturing milestones, with clearer points at which payment falls due and what has been finished at each.
It is not a CommBank product. The contract is available to builders, manufacturers, customers and lenders regardless of which lender provides the finance. PrefabAUS says further work is underway to digitise it.
PrefabAUS executive chairman Damien Crough has argued that the lack of a dedicated prefab contract, one that aligns payments and finance with factory timelines, has been one of the brakes on wider adoption. His point is that existing contracts were written for site based delivery, and prefab has been forced to fit them.
Why lenders struggled to fund factory built homes
The finance problem was never really about the product. It was about security.
A construction lender releases money as value is added to land it holds a mortgage over. A home sitting in a factory is not on that land yet. Until recently, that meant buyers often had to fund much of the factory stage themselves. CommBank has said a customer building prefab could previously have had to fund up to 90 per cent of the upfront costs.
Since 2025, CommBank has allowed eligible customers to draw progress payments before the home is fixed to the land. Under the policy as published, customers can access up to 60 per cent of the contract price or 120 per cent of their land equity, whichever is lower. Where the manufacturer is on the bank’s list of CommBank Assessed Manufacturers, that rises to 80 per cent of the contract price or 150 per cent of land equity, again whichever is lower, for fixed price contracts up to $1.5 million.
The land equity cap is the detail worth noticing. How much can be drawn before delivery still depends on what the client’s land is worth, not only on what the house costs.
What is an offsite progress payment?
An offsite progress payment is a staged payment released while a prefabricated home is still being manufactured away from the building site, before it is transported and fixed to the land.
Conventional construction loans release payments as work is completed on the buyer’s land, which the lender holds as security. Offsite payments are tied instead to manufacturing milestones. CommBank caps the amount it releases before delivery by reference to both the contract price and the value of the land.
State building laws still sit over the top of any contract
A standard contract does not replace state legislation. As with all standard form contracts in Australia, the domestic building laws in each state and territory set their own rules on deposits, progress payments and consumer protection, and those rules apply whatever the parties sign.
Victoria shows how the mismatch plays out. Its Domestic Building Contracts Act sets default progress payment stages for a new home, running from base through frame, lock up and fixing. A builder and owner can agree a different schedule, but only with a prescribed warning that the owner signs.
In its submission to the Victorian review of the Act, Master Builders Victoria said the progress payment provisions do not deal adequately with work done offsite, leaving builders to fund manufacturing without matching payments. It also said lenders tend to treat the default schedule as the industry standard and are reluctant to finance contracts that depart from it.
That observation explains why a published, lender neutral document matters. Part of the problem was never the stages themselves. It was the absence of a recognised contract that banks, builders and owners could all point to.
In New South Wales, the new Building (Approvals and Practitioners) Act 2026 gives a legal definition of a prefabricated building for the first time. How far Home Building Act protections will reach factory work depends on regulations that have not yet been made.
The contract moves the timing of risk, not the risk
Paying for a home before it arrives shifts the timing of risk. It does not remove it. Under offsite progress payments, the client’s money is released while the home is still with the manufacturer. If something goes wrong in the factory, that money has already moved.
Paying for a home before it arrives shifts the timing of risk. It does not remove it.
CommBank is explicit on this point. In its own policy material, the bank says it does not endorse or guarantee the quality of work or the future financial stability of any Assessed Manufacturer, and that the customer is responsible for choosing one.
That leaves the questions builders ask of any offsite supplier. Where the components are made. How compliance and mandatory inspections are satisfied when the work happens off site. What happens to modules that have been paid for if the manufacturer runs into trouble before delivery.
Speed is real but narrower than the headline suggests. PrefabAUS says prefab homes can be built in as little as eight to 12 weeks, compared with 12 to 24 months for traditional construction. Lester Raikes, managing director of prefab builder Anchor Homes, noted in comments published by CommBank that design, documentation and planning can still take months before the factory clock starts.
Raikes also cautioned against expecting a steep discount. He described modular homes as affordable rather than cheap, and said they would not come to market at half the price of a traditional build. The savings he pointed to sit elsewhere, such as knockdown rebuild clients who can stay in their existing home while manufacturing begins, rather than renting for a year.
Why regional builders may notice first
The strongest case for prefab is where local capacity is thinnest. Raikes said demand for his business is strong in regional Victoria and New South Wales, where some local builders already have years of work booked ahead of them.
By his estimate, around 80 to 90 per cent of a modular home can be built offsite. The remaining site work, including footings, services, connections and completion, still depends on trades on the ground. For regional builders, that looks less like a threat and more like a different split of the same job.
The national housing target is moving the other way
PrefabAUS frames the contract around the target of 1.2 million new homes by 1 July 2029. The National Housing Supply and Affordability Council’s August 2026 Quarterly Report now estimates that target will be reached in the December quarter of 2030, one quarter later than it expected in April.
That is despite a record 244,000 dwellings under construction in the March quarter, the highest since records began in 1984. The same report found house construction costs rose 2 per cent in the June quarter.
A standard contract will not close that gap on its own. What it does is take one reason off the table. If the finance and the paperwork now fit the method, the remaining questions are about capacity, compliance and trust in the manufacturer. That is where the conversation belonged all along.
The Good Builder Take
This is a useful piece of plumbing, not a breakthrough. The industry has spent years blaming finance for slow prefab uptake, and part of that was fair. A shared contract that any lender can read removes a genuine excuse.
What it does not do is make the factory stage safe by default. Money now leaves earlier, so the quality and financial strength of the manufacturer matter more, not less. The builders who do well out of this will be the ones who ask the hard questions about their offsite partners before the first milestone payment, not after.
Frequently asked questions
It is the PrefabAUS Standard Form Contract for Class 1 Domestic Construction, released in September 2026 for single detached prefabricated homes. It sets payment stages aligned to factory manufacturing milestones rather than on site construction stages. It was developed through sponsorship by the Commonwealth Bank.
Yes. PrefabAUS says the contract is available to builders, manufacturers, customers and lenders regardless of which lender provides the finance. CommBank sponsored its development, but it is not a CommBank product.
Under CommBank’s published policy, eligible customers can draw up to 60 per cent of the contract price or 120 per cent of land equity, whichever is lower, before the home is fixed to the land. With a CommBank Assessed Manufacturer, that rises to 80 per cent or 150 per cent of land equity, whichever is lower, for fixed price contracts up to $1.5 million.
No. State and territory domestic building laws on deposits, progress payments and consumer protection still apply. In Victoria, for example, a schedule that departs from the default progress payment stages requires a prescribed warning signed by the owner.
Not necessarily. Anchor Homes managing director Lester Raikes, in comments published by CommBank, described modular homes as affordable rather than cheap and said they would not come to market at half the price of a traditional build. Savings are more likely to come from shorter displacement on knockdown rebuilds.
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Last updated: 30 September 2026. Housing figures from the NHSAC August 2026 Quarterly Report. Lending caps from CommBank’s published prefab policy.
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