The Newstead SME Real Estate Lending Fund (RELF) aims to deliver £1bn of funding over its lifetime in order to enable the creation of sympathetic and environmentally responsible projects, while supporting the regional SME housebuilding sector and boosting job creation.

The fund’s underwriting process will be overseen by Newstead — it will incorporate its own credit and ESG metrics and will encourage the development of sustainable housing by taking new homes’ energy efficiency into account at the underwriting stage.

Homes England, alongside Greater Manchester Pension Fund, clients of listed wealth manager Mattioli Woods, and other private institutional investors have committed £80m to the initial close of the RELF.

The intention is to grow the fund to £300m.

“This partnership is our latest intervention to offer SME housebuilders a route to finance that may otherwise be unavailable through traditional means,” said Peter Denton, chief executive at Homes England.

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“Introducing new sources of institutional capital to support SME housebuilders is a priority for Homes England and our cornerstone investment in this fund signals government support for accessible and competitive finance to meet the needs of SME developers across the country.

“We look forward to working with our new partners and welcome further institutional capital to help grow this fund and give SME housebuilders the helping hand they need to get more quality homes built in our regions.”

Simon Champ, CEO at Newstead Capital, added: “This is an exciting step for Newstead as we are providing a conduit for long-term institutional investors to gain access to a market which until now has been out of reach.

“Regional housebuilding has historically been critical to the economy, providing the country with a diverse range of smaller housing communities. 

“The fund gives pension, insurance, and wealth management institutions an appropriate long-term investment platform to support this vital industry.

“By meeting this demand, we will provide an attractive return for investors, the taxpayers, and Manchester retirees, while also empowering local SMEs to compete with larger housebuilders.

“The Newstead RELF fund will allow more new homes to be built, tackling the housing shortage and contributing to levelling up by allowing smaller sites to be developed with the associated environmental benefits.”