ATLANTA—Lending is being constrained by new rules that are part of the Basel Accords and place punitive capital constraints on banks for construction loans. How will this to impact capital markets?

Nobody has all the answers. But KC Conway, credit risk manager and chief valuation officer at SunTrust Bank, has some valuable insights into this hot topic.

First, he gives us the baseline: the High Volatility Commercial Real Estate—or HVCRE—rule for construction loans imposes capital requirements that are 150% above what is considered normal. Next, he explains that projects are considered HVCRE if the developer does not have equity in the project equal to 15% of its future “completion value.”