Canada's mortgage market and related banking industry are quite mature and heavily regulated. The Financial markets in Canada have been viewed as one of safest where the five largest banks in the country control over 90% of the outstanding residential mortgage and currently offer competitive mortgage rates depending on the length of the term.

Canadian banks have largely ignored the real estate development market, particularly in the early land-purchase stage, where developers purchase properties to build condos and townhouses, due to the development risk in receiving approvals for zoning, development and construction permits. However, once the construction permits are secured, the banks will step in and provide construction loans that replace existing land mortgages.

The mortgage investment on the development properties is secured by the land title, which means that in the event of default, the lender can take possession of the properties and sell them in the open market. The loan-to-value ratio is low, and these land loans are usually short-term, typically between 1 to 2 years, compared to residential mortgages which are 20 to 30 years.

These land loans charge a higher interest rate than construction loans. The rate changes sync with the economy's prime rates, providing a hedge against inflation and general economic condition. Mortgage refinancing or construction lending from the banks provides the exit to repay the existing mortgages.

The potential customers who can benefit from this investment strategy are real estate developers who need capital to purchase land and hold it until various permits are granted, as well as private fixed-income investors whose capital is invested with the security of the target properties.

Over 80% of residential real estate developers currently rely on private capital to secure land purchases and holdings. The market for this type of investment is vast, and more and more private fixed-income investors are taking advantage of this market to beat their investment return targets with peace of mind about the safety of their capital.