The council will contribute £10m towards the first part of the scheme due to start in 2012. A further £18m will be released in private funding.

The overall scheme, which will include around 800 new homes on brownfield land, is expected to take more than ten years to complete.

Cllr Harvey Jennings, leader of Derby City Council said: “Castleward will replace a 30-acre brownfield area of the city with a sustainable community of something like 800 homes, including extensive affordable housing, schools and community spaces. It will provide a fantastic lift for the city and embodies our ambition to continue to invest in Derby.”

Phase 1 will include around 70 homes, 2,500sq m of commercial space, community facilities and a new central park/square.

The completed scheme will also boast a nursery school and primary school, community facilities, local shops and improved links to Bass’ Rec.

Dave Bullock, managing director of Compendium Living, said: “We are absolutely delighted to have been chosen by Derby City Council as their preferred partner for the development of this very important site in the city. We believe Castleward Urban Village will provide a great new residential neighbourhood and be a perfect environment for people who want to enjoy the benefits of city centre living with the comfort and amenity of high quality family housing.

“It will help support the Council’s continuing drive for economic growth and add another choice for prospective residents in this vibrant city.”

After signing the development agreement, Compendium Living will submit a masterplan to apply for outline planning permission for the scheme and a detailed application for Phase 1.