A residential development lender has established a new £250 million fund to dip into the high-ticket development finance sector, in an effort to tackle the competitive market in London and the South East.

Pluto Finance is aiming to target the small residential developers around the capital, with loans of up to 90 per cent GDV and ticket sizes between £10 million and £30 million.

The company aims to lend £250 million over the next five years, after securing £100 million from institutional investment schemes.

The loans will be in the form of stretched senior development finance, combining senior and mezzanine debt into a single loan. These loans will therefore provide significantly more capital to developers than traditional senior debt providers.This will enable developers to kick-start new projects and also spread their equity across a greater number of schemes.

Pluto, based in Covent Garden, has already completed its first loan, a £12.1 million deal made on a 36-home development in West Hampstead.

Speaking on the new announcement, Chris Philp, Chief Executive of Pluto Finance, said: “Developers continue to find it difficult to source adequate funding for their schemes.

“We are helping to fill the gap left by the large number of banks that have withdrawn from the residential property development finance market in the last five years.”

The stretch senior product is in addition to the existing mezzanine funding which Pluto Finance already offers to residential developers. In the last two years, Pluto Finance has funded projects with a GDV in excess of £200 million. The mezzanine product will continue to be available for projects with a total cost of under £10 million.

Manish Chande, Senior Partner at Clearbell Capital LLP, said: "In the face of relentless demand for quality new build homes in many parts of the South-East, access to funding remains the key sticking point for developers, even for some of the most established and successful firms.

“This new offering will provide more capital than is ordinarily available to home-builders, allowing stalled projects to get off the ground and stimulate new developments."