Andrew McMahon, 48, was the builder in charge of renovating the Albion Hotel when he lit a fire on the pub's ground floor on October 5, 2015.

The Berwick man hoped to buy himself an extra fortnight to finish the project, which was running behind schedule, the County Court heard on Tuesday.

McMahon, who pleaded guilty to arson, initially told police that masked burglars had knocked him unconscious, but later said he only intended to "start a small fire".

An earlier hearing was told that the blaze destroyed the hotel and damaged neighbouring buildings, causing $5.1 million in damage.

McMahon was under mounting financial pressure to complete the building, with looming debts associated with the project and thousands of guests invited to attend its official launch party, the court heard.

It is understood the owners had wanted the project finished in time for the 2015 Spring Racing Carnival.

McMahon, emigrated from Scotland to Australia with his family when he was 12.

He is now a married father of two and a permanent resident but not an Australian citizen.

Defence counsel George Georgiou, SC, said it was unclear whether his client had a valid visa but said he was "very much at risk of deportation at the [end] of his sentence" because he did not have citizenship.

Mr Georgiou said that McMahon's knowledge of this possibility could be viewed as an additional punishment while he served his prison term.

CCTV footage played in court showed the man – who did not have the keys to the hotel that day – tried to enter the building for about 20 minutes before eventually climbing up to the beer garden on the second floor.

Psychologist Patrick Newton diagnosed McMahon as having a "generalised anxiety disorder", saying he had feared he would lose his business and his relationships if he was forced to meet the project's deadline.

The fact that McMahon had failed to notice the CCTV cameras which ultimately revealed he was the only one to leave and enter the building that morning, showed his behaviour was not akin to a "criminal mastermind" but the "ham-fisted" efforts of someone reacting irrationally and disproportionately to their worries.

Prosecutor John Livitsanos said it took arson investigators nine months to unravel McMahon's lies.

A week before the fire, McMahon had falsely told numerous people on the construction site that he had received a call from someone who believed he was former AFL footballer Luke Darcy and threatened to "f---k" him over if he did not pay him $100,000.

This followed an incident where drugs were found at Richmond's Precinct Hotel, which Mr Darcy and other family members owned.

The court heard McMahon had also instructed workers to disconnect the power to the building beforehand, so that the security system inside the building would not work on the morning of the fire.

Mr Georgiou pushed for a lower sentence for McMahon, saying his mental health problems reduced his moral culpability for the crime.

The pre-sentence hearing before Judge John Jordan continues.