The scheme will see Greater Manchester Pension Fund and Manchester City Council work in a novel partnership to build the homes.
For its part the city council will release land into the joint venture at fair market valuation and GMPF will inject £25m to fund building.
Both partners will then receive a capital payment on the sale of houses and an annual revenue return.
The new homes will be built in Chorlton-cum-Hardy, Gorton and Brooklands and be split between affordable and private sale.
Greater Manchester has seen a 76% reduction in the number of new completions from the year of 2007-2008 to 2010-2011, the Council said. It also predicts that the number of completions are unlikely to rise, given the number of sites under construction at present.
Greater Manchester Pension Fund, which is worth around £11bn, is the pension scheme for the 10 local authorities in Greater Manchester and associated bodies, such as schools, colleges and charities.
A Greater Manchester Pension Fund spokeswoman said that the scheme would “satisfy the fund’s twin aims of commercial returns and supporting the area”.