Whilst this situation is ermmm unusual, it's a fairly simple equation for the bank:
If they believe that you will in a timely fashion competently build a new house that will result in a total value of the land and buildings at more than the total debt...
And if you continue to make your contractual regular payments
.....then their best decision will be loan the money.
If they consider that their money is looking less secure by the day, that you will not or cannot build well enough to add value to the land...
And if you default on your payments....
Then they would make a decision to cut their losses and foreclose on their mortgage and sell the plot.
It doesn't sound as though you have got to that stage yet
and so I wish you luck with the construction plans. I bet your poor bank manager is wishing that he had more conventional customers who don't cause him these 'doesn't fit in the boxes on the computer' forms