M&G Investments is backing a Scottish housing association with a £40m (€45.5m) loan to help build new homes.

Queens Cross Housing Association said it has secured the funding to help transform the Hamiltonhill area of Glasgow into a new urban suburb.

The Hamiltonhill development is on schedule to start on-site in the spring. The plan is to build 300 affordable homes for rent and a further 300 new build homes for sale.

The money will also allow the association to restructure existing debt, freeing up more money to explore other development opportunities in the area.

Glasgow City Council will also be a key partner and funder delivering the project as part of the Glasgow Canal Regeneration Partnership area.

The financing is the housing association’s debut private placement transaction.

Until 2007, housing associations generally relied on banks and The Housing Finance Corporation to meet their external funding requirements.

In recent years non-bank lenders have been providing an increasing amount of longer-term finance as banks withdraw from this market.

M&G was the first long-term institutional investor to make a bilateral investment in a Scottish housing association.  

Mark Davie, the head of social housing at M&G Investments said the latest deal is the firm’s third deal with a housing association in Scotland.

“This transaction will deliver sustainable long-term returns to our pension fund clients, secured against residential property.

“M&G has now invested over £6bn in UK social housing and we are always looking for more opportunities to invest, to help address the shortage of affordable homes across the country.”

Shona Stephen, the CEO of Queens Cross, said: “Building a relationship with an asset management company for funding is a first for Queens Cross.

“This innovative approach to securing investment is a great demonstration of our commitment to explore all avenues to secure the funds we need to help improve the lives of our tenants, and to build Queens Cross as an area people can be proud to call home.”