Full payment for the Napier Hospital site was not made by settlement date, but the purchase and development of the site will proceed, the developer says.

Wellington's Primeproperty agreed in 2006 to pay $20 million for the 4.6-hectare site on Napier Hill, the Dominion Post has reported.

It paid a deposit of $1.5 million to the Crown Health Funding Agency, which handled the sale on behalf of Hawke's Bay District Health Board. The remaining $18.5 million was to have been paid on April 30 this year. Agency chief executive Graeme Bell confirmed yesterday that settlement had not been made. However, "we still have our contract in place".

A confidentiality agreement with Primeproperty meant he could not elaborate.

If the sale did not proceed it would have serious implications for the health board: if the sale fell through the board's current forecast deficit of $7 million would jump to closer to $20 million.

Primeproperty Group director Eyal Aharoni said a resource consent application for a large residential development would be lodged with Napier City Council within the next two months.

"The settlement date doesn't affect anything. Currently there is some discussion between me and the vendor that I cannot comment on," he said.

"Nothing has changed in my plans.

"I am hoping I will get my consent, but nothing is guaranteed. I can see great opposition to other developments around Napier and I hope mine is not going to get the same treatment."

His plan included a large number of apartments and could be scaled up or down depending on the council's wishes, he said.

"I think it will be a very well-liked development.

"Most developments get a negative response on the drawing board, but are very well-liked when completed."

The project would take at least 10 years to complete.

"We're still not sure which age group we're targeting in terms of the occupiers, but the current economic climate removes the younger age group from the picture and we will be targeting more retirement-age group," Mr Aharoni said.

The hospital has not been used since 1998, when Hawke's Bay hospital services were centralised in Hastings.