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Pluto Finance has launched a £250 mln (€295 mln) business which will provide finance for housing developments in London and the southeast of England.

The London-based residential development lender said the move represented a significant injection of capital into a sector which has been starved of traditional bank finance in recent years.

The new vehicle will provide developers with a single loan of up to 90% of the cost of the development. The loans will be in the form of stretched senior development finance, combining senior and mezzanine debt.

Pluto Finance said that it would provide significantly more capital to developers than traditional senior debt providers, enabling them to kick-start new projects and spread their equity across a greater number of schemes.

Pluto Finance’s new business aims to lend £250 mln over five years. It has secured initial equity commitments of £100 mln from institutional investors, including Clearbell Property Partners II. When developments have been completed, recycling of the capital will enable Pluto Finance to lend up to £250 mln over time. Loan sizes will be £10 mln to £30 mln per project.

The first loan has already been made for a scheme in West Hampstead, north London. The £12.1 mln loan will fund the development of 36 units, comprising 33 flats and three townhouses. Construction will start in August and completion is expected in November 2014.

The stretched senior product is in addition to the existing mezzanine funding, which Pluto Finance offers to residential developers. In the last two years, Pluto Finance has funded projects with a gross development value of more than £200 mln. The mezzanine product will continue to be available for projects with total costs of less than £10 mln.

Chris Philp, CEO of Pluto Finance, the residential development finance arm of Pluto Capital, said: 'We are helping to fill the gap left by the large number of banks that have withdrawn from the residential property development finance market in the last five years.'